Investing in stocks is a great way to build wealth by harnessing the power of growing companies. Getting started can seem daunting to many beginners looking to get into the stock market despite the potential long-term gains, but you can start buying stocks in minutes.
So how exactly do you invest in stocks? It’s actually quite simple and you have several ways to do it. One of the easiest ways is to open an online brokerage account and buy stocks or stock funds. If you’re not comfortable with that, you can work with a professional to manage your portfolio, often for a reasonable fee. Either way, you can invest in stocks online and get started with little money.
Here’s how to invest in stocks and the basics of how to get started in the stock market, even if you don’t know much about investing right now.
investing in stocks: 4 easy steps to get started
Do you want to start investing in stocks? Here’s a four-step checklist to help you get started:
- choose how you want to invest
- open an investment account
- decide what to invest in
- determine how much you can invest – then buy
1. choose how you want to invest
Nowadays, you have several options when it comes to investing, so you can really tailor your investing style to your knowledge and how much time and energy you want to invest. you can spend as much or as little time investing as you like.
This is your first big decision point: how will your money be managed?
- a human professional: This do-it-for-me option is a great option for those who want to spend just a few minutes a year worrying about investing. is also a good option for those with limited investment knowledge.
- a robo-advisor: a robo-advisor is another solid do-it-for-me solution that has a program automated system that manages your money using the same decision process as a human advisor, but at a much lower cost. you can set up an investment plan quickly, and then all you need to do is deposit money, and the robo-advisor does the rest.
- self-managed: this “ the “do it yourself” option yourself” is an excellent option for those with more knowledge or those who can spend time making investment decisions. if you want to select your own stocks or funds, you will need a brokerage account.
Your choice here will determine what type of account you open in the next step.
2. open an investment account
so what type of account do you want to open? here are your options:
if you want a professional to manage your money
- A human financial advisor can help you design a stock portfolio and can help you with other estate planning moves, like planning for college expenses. A human advisor typically charges around 1 percent of your assets annually, with a high minimum investment. One big plus: A good human advisor can help you stick to your financial plan. Here are six tips for finding the best advisor, and what to watch out for.
- A robo-advisor can design a stock portfolio that matches your time horizon and risk tolerance. they are usually cheaper than a human advisor, often a quarter of the price or less. Additionally, many offer planning services that can help you maximize your wealth. The bankrate review of the top robo-advisors can help you select the right robo-advisor for your needs.
bankrate also offers detailed reviews of the top robo-advisors so you can find the advisor that best suits your needs.
if you want to manage your own money
- An online broker allows you to buy stocks and many other types of investments, including bonds, exchange-traded funds (ETFs), mutual funds, options, and more. The best brokers offer free commissions on stocks, as well as plenty of education and research at no additional cost, so you can up your game fast. bankrate review of the best brokers for beginners can help you select the right one for your needs.
bankrate also provides detailed reviews of the top online brokers so you can find a broker that meets your exact needs.
If you opt for a robo-advisor or an online brokerage, you can have your account open in literally minutes and start investing. if you go with a human advisor, you’ll need to interview a few candidates to find which one will work best for your needs and keep you on track.
3. decide what to invest in
The next big step is figuring out what you want to invest in. this step can be daunting for many beginners, but if you opted for a robotic advisor or a human advisor, it will be easy.
with an advisor
If you’re using an advisor, be it human or robot, you won’t have to decide what to invest in. that’s part of the value these services offer. For example, when you open a robo-advisor, you’ll typically answer questions about your risk tolerance and when you need your money. The robo-advisor will then create your portfolio and choose the funds to invest. all you need to do is add money to the account, and the robo-advisor will create your wallet.
through a brokerage
If you use a brokerage, you will have to select each investment and make trading decisions. You can invest in individual stocks or stock funds, among many other assets. the best brokers offer free research to help with this process and offer a ton of resources to help beginners.
If you are managing your own portfolio, you can also choose to invest actively or passively. the key difference between the two is that you determine how much time you want to invest. Passive investors generally take a long-term perspective, while active investors tend to trade more frequently. Research shows that passive investors tend to do much better than active investors.
4. determine how much you can invest and then buy
The key to building wealth is adding money to your account over time and letting the power of compounding work its magic. that means you need to budget money to regularly invest in your monthly or weekly plans. The good news is that it’s very easy to get started.
How much should I invest?
How much you invest depends entirely on your budget and time frame. While you can invest what you can comfortably afford, experts recommend that you leave your money invested for at least three years, and ideally five or more, so you can ride out any bumps in the market.
If you can’t commit to keeping your money invested for at least three years without touching it, consider creating an emergency fund first. An emergency fund can prevent you from having to exit an investment early, allowing you to ride out any fluctuations in the value of your shares.
how much do you need to start?
Most of the top online brokers these days have no account minimum (or extremely low account minimums), so you can get started with very little money. Additionally, many brokers allow you to buy fractional shares of stocks and ETFs. if you can’t buy a whole share, you can still buy a part of one, so you can really start with pretty much any amount.
It’s also just as easy with robo-advisors. few have a minimum account and all you have to do is deposit the money – the robo-advisor takes care of everything else. set up an automatic deposit in your robo-advisor account and you only have to think about investing once a year (at tax time).
once you have opened your account, deposit money and start investing.
how to manage your investments
You’ve created a brokerage or advisor account, so now it’s time to keep an eye on your portfolio. that’s easy if you’re using a human advisor or a robotic advisor. your advisor will do all the heavy lifting, managing your portfolio for the long term and keeping you on track.
If you are managing your own portfolio, you will have to make the trading decisions. Is it time to sell a stock or a fund? Was the last quarter of your investment a signal to sell or buy more? if the market falls, will you buy more or sell? these are difficult decisions for investors, both new and old.
If you’re actively investing, you’ll need to stay on top of the news to make the best decisions.
However, more passive investors will have fewer decisions to make. With their long-term focus, they often buy on a fixed regular schedule and don’t care much about short-term movements.
tips for beginner investors
Whether you have opened a brokerage account or an account managed by an advisor, your own behavior is one of the most important factors in your success, probably as important as the stocks or funds you buy.
here are three important tips for beginners:
- While Hollywood portrays investors as active traders, you can succeed, even beat most investors, by using a passive buy-and-hold approach. One strategy: Regularly buy an S&P 500 index fund containing America’s largest companies and hold on.
- It can be valuable to monitor your portfolio, but be careful when the market falls. You’ll be tempted to sell your stock and deviate from your long-term plan, hurting your long-term earnings in order to feel secure today. think long term.
- To avoid freaking out, it can be helpful to look at your portfolio only at specific times (for example, the first of the month) or only at tax time.
As you begin to invest, the financial world can seem daunting. There is much to learn. The good news is that you can move at your own pace, build your skills and knowledge, and then move on when you feel comfortable and ready.
best stocks for beginner investors
As a new investor, it may be a wise decision to keep things simple and then expand as your skills develop. Fortunately, investors have a great option that allows them to buy shares in hundreds of America’s top companies in one easy-to-buy fund: an S&P 500 index fund. This type of fund allows you to own a small stake in some of the best companies in the world at a low cost.
an s&p 500 fund is a great option because it provides diversification and reduces the risk of owning individual stocks. and it’s a solid choice for investors, from beginner to advanced, who don’t want to spend time thinking about investing and would rather do something else with their time.
If you’re looking to expand beyond index funds and into individual stocks, it may be worth investing in “large-cap” stocks, the largest and most financially stable companies. Look for companies that have a strong long-term track record of growing sales and earnings, don’t have a lot of debt, and are trading at reasonable valuations (measured by price-earnings or other metrics) so you don’t buy stocks that are overvalued.
frequently asked questions about investing in stocks
do you have to live in the usa? u? open a stock brokerage account?
no, outside the us. uu. Investors can open brokerage accounts and invest in the US. uu. businesses, but they may face some additional hurdles to get started. investors residing outside the us uu. You may be required to show additional forms of identification to prove your identity when opening an account and there may be even more forms on top of that to ensure proper tax filing. Be sure to check with the broker for guidance on how to invest when you live outside the country.
How much money do I need to start investing?
not much. Most online brokers have no minimum investment requirements and many offer fractional stock investing for those starting out with small amounts. You’ll want to make sure the money you’re investing isn’t needed for regular expenses and can stay invested for at least three years. Building up some savings in an emergency fund is a good idea before you start investing.
Do I have to pay taxes on the money I earn from the shares?
If you hold those shares in a brokerage account, dividends and earnings on the shares will likely be taxed. The rate you pay for capital gains will depend on how long you’ve held the investment and your level of income. If you hold shares in tax-advantaged accounts, such as a Roth IRA, you won’t pay taxes on profits or dividends, making these vehicles ideal for retirement savings.
The good thing about investing these days is that you have many ways to do it on your own terms, even if you don’t know much at first. you have the option to do it yourself or have an expert do it for you. You can invest in stocks or stock funds, actively trade or passively invest. Whichever way you choose, choose the investment style that best suits your needs and build your wealth.