You’ve finally decided that you want to invest in the stock market and potentially make outstanding returns on your money! But where do you start? How do you actually buy a piece of a company?
First off, congratulations, you’re making a very wise financial decision. On this page, you will find a guide that will walk you through the four key steps regarding your first investment.
1) Open and Fund a Brokerage Account
Before you can purchase stocks, you must open a brokerage account. A brokerage account is a type of financial account that allows you to buy and sell stocks.
Once you open your brokerage account, you must fund the account so you can actually purchase your investments. There are many ways to fund an account: cash, check, and other options.
Some brokerage accounts require a minimum balance to open, but most do not. When deciding how much to invest initially, choose an amount that fits your financial status the best! It could be $10, $100, $1000 or more.
2) Select and Research Investments
This step is arguably the most important because you want to buy quality companies that are growing or are leaders in the industry in which they operate.
The best way to find stocks is by looking at things you use in your everyday life. For example, your iPhone is made by Apple or you may buy your groceries from Walmart each week.
Once you identify companies, you should analyze their financials. Under the “Investing” tab, there are pages that show how to do this.
3) Purchase Your Investments
Once you’ve identified good investments and researched them, its time to purchase them! Once your purchase shares in a company, you are now a partial owner.
Remember, time in the markets is better than timing the market. Simply put, it is not wise to wait around for the “best” or lowest price because there is no way of knowing when it will come.
4) Sit Back, Relax, and Watch
Now that you’ve opened your account, selected and researched investments, and purchased them, now you can wait for the gains to roll in.
It’s important to remember that stocks don’t go straight up. There will be ups and downs along the way but if you believe in the company and its financials are good, it shouldn’t be a problem.
It’s also important to note that gains are guaranteed in any investment. Investments always have the potential to lose value.
Index funds are investments that mirror the performance of a stock market index such as the Dow, S&P 500 or Nasdaq. Traditionally, index funds have been a way for investors to invest in the stock market without doing extensive stock research. Also, index funds trade like stocks so you can buy and sell them instantly. Most index funds charge low fees, so it makes them even more appealing for beginner investors.
VOO and SPY are popular ticker symbols for S&P 500 Index Funds.