A Simple Guide on How to Buy Stocks Conservatively
Investing in stock can be a tricky undertaking. Stock has long been thought of as something you should not do if you do not understand the nuances of stock trading. Things have changed over the years when it comes to stocks and day trading. If you are in a position where you are considering trading stock, then you may be ready to take the plunge into investing.
Invest Into Stocks Smartly
In reality, you do not need to know anything about stock before you begin investing your money. You can buy some stock, take your chances and hope for the best. You might get lucky, but you might not and lose all of your money. I would recommend that you gain a little knowledge and learn the basics about how to buy stocks before you jump in with both feet.
What Is Stock?
Before you can really learn how to buy stocks and how to make money with them, you should understand what stock is.
Basically, stock is shares in a company. When you own shares in a company, you become a shareholder and you benefit from the company's profits. The more stock you have means the more profits you receive.
When a company is private, they do not sell their stock. However, once they choose to become public that means they a selling stock in their company. They may decide to only sell a percentage of stock, so that the owner is still the primary shareholder. Companies often choose to go public to obtain money to invest into the business.
Value of Stocks
Investors that are interested in buying and selling shares often do so through a stockbroker. The stock exchanges monitor both the track and the demand of all stock, which directly affects the stock’s price. The prices change throughout the day, but stockholders hope that despite the fluctuation, the value of the stock will increase with time.
It is not always roses and sunshine. Business fold or lose value and it can happen quickly. Those who are invested in the company can lose a lot of money when that happens. That is why investors are constantly monitoring their stock and watching for things that may warn them of a drop in value. Smart investors also diversify their money and their investments so that they do not have all of their money in one place. That way if a business or a set of businesses take a hit, their invested money will not completely take a nose dive.
Is Investing In Stock Risky?
Well, it can be. How is that for a clear answer? It really depends on how much money you invest and where you put it. It also depends on what you mean by risky. Do you mean that you might lose your money? Do you mean that you put money into stock and it sits there and takes forever to grow? You can be conservative with stock, but it may not grow quickly and you may have to leave it where it is for a number of years.
Taking your money and buying some stock with it is the easy part and may not really make much money. The trading part is where it becomes tricky and you have to know what you are doing to make money and not lose your shirt. The key is learning how to buy stocks and see your money grow but not lose it. It is not as difficult as it might sound. One of the good things is there are plenty of documents and information for beginners to learn how to invest in stock without a lot of money.
Are There Better Ways To Invest?
There is a safer way to invest your money. There are ways to invest your money so that it climbs at a steady pace over time. Your money will not see much fluctuation, which means there is not much risk, but there is also little reward. Let me explain a little about the different types of stock that you can purchase. When you are learning how to buy stocks, you should understand the difference between individual stock and stock mutual funds.
Individual vs Stock Mutual Funds
Stock mutual funds are also called exchange-traded funds (ETF). Individual funds are stock in one specific company. You can start slowly by buying one share, or many shares in one company. You can create a portfolio that is diverse with individual stock, but it takes a lot of money to do so.
ETFs are mutual funds that allow you to purchase small amounts of many different stocks in one purchase. When you purchase several of these different funds, you have a portfolio that is completely diverse. You also own a small amount of each of the companies in all of the mutual funds. Stock mutual funds are less risky because they are much more diverse naturally.
As I stated early, they have little fluctuation but you also cannot expect them to increase off the charts. Many experienced in investing create a portfolio mainly with mutual funds.
What Is The Smartest Way To Invest In Stock?
When you are thinking about how to buy stocks as a beginning, you should focus your attention on mutual stock funds before you really begin to play with trading individual stock. I know when you think about playing the stock market, you see the traders on the floor of the stock exchange throwing hand symbols around. You want to do a modern version of that. Trust me, I understand. You have to understand a lot about the world and what is happening that impacts stock to be able to trade effectively.
Mutual Funds
As a beginner, you should focus on a diverse portfolio with mutual funds. They allow you to but a large selection of various stock within the same fund. Mutual funds are a safer investment. They give you a slow and steady increase over time. Investing means putting your money somewhere and patiently waiting. Yes, you can get lucky, buy a bunch of stock that skyrockets and then you sell it and make a ton of money. However, that is rare and I would not count on it.
Investors that only put their money in individual stock usually do not do well over the long term. When you are thinking about conservatively investing in stock, that means you are focused on slow, steady, and stable growth.
Buying Stock Using an App
There are a ton of apps available to you. Some teach you how to buy stocks, while others just make all the decisions for you. It depends on how hands-on you would like to be with your investing. There is also a mid-range that allows you to do a bit of both.
If you want to pick and choose your stock and mutual funds for yourself and handle all your trading, then you want an online stockbroker. It does not matter if you are an expert at trading or new to the game, there is a perfect app for you. If you prefer to let someone else manage it all for you, you can pay for a service that does that, too. Just about every brokerage firm available offers these types of services. Some are more cost-effective than others.
Online Investing
When you want to do it yourself, online is the fastest and most affordable way to invest in stock on other securities. You can open an account online, link it to your checking account and begin investing. If you do not already have an individual retirement account (IRA), or something similar, you can open one with most of these online brokers.
When looking for an online broker, pay attention to their fee structure. Many of them have trading commissions, account fees, and trading fees. Pay attention to the investments they have available to you as well as all the tools they have. If you are new to investing, you want a broker that gives you effective means to learn more. Some online brokers you can consider are TD Ameritrade, which has great customer support, Merrill Edge, with no account minimum, and E-Trade, which has some of the best educational resources.
Investing On A Budget
So, now you think you have learned enough about how to buy stocks that you are ready to take the plunge. But, you either do not have a lot of money to invest, or you just are not ready to invest a large sum. I cannot say I blame you. I personally have a set amount of money set aside to invest in stock. This is money I can afford to lose, just in case I do.
It is not much, but over time I have watched it build and grow. For me, that is how I buy stock conservatively. I never put money into stock that I cannot afford to lose. I am sure you want to know what strategy you should employ when deciding your budget for investments.
Decide How Much Money You Can Afford to Put in Stock
Do not take money that you need for rent or food. Pay all your bills first, then figure out how much you have left to spend. There are a few ways to go about this. When you are looking at individual stock, one share can cost anywhere from under $100 to thousands of dollars. However, with these online apps, you do not have to buy a whole share. You can buy a percentage of one share. This means you will not earn money quickly, but it lets you invest a small amount of money conservatively and watch what happens with it.
If you are considering mutual funds, some of them have limits of $1,000. The brokerage app you choose dictates how much money you need to open your account and how much you can spend on stock. When you are investing small amounts at a time, it is harder to keep a diverse portfolio. It will keep your money safe.
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There is so much information available online about how to buy stocks, it is overwhelming. There are plenty of people that want to give you advice about how to proceed with your investments. It is hard to know which one to trust. There are money management articles you can read and games you can play to figure out what type of investments are best for you.
It is easy to get lost in all the articles and continue to be uncertain about how to proceed. One positive is many of the investing app and brokerage firms offer a large amount of training, guides, videos, and articles. When you are looking for the right app or company for you, you should consider what types of training and help they offer to beginning traders.
You will be pleasantly surprised at how helpful many of the firms are to their investors. Let's be real, when you make money, they make money, too. I would suggest that you read as much information as you can about stocks, investing, and trading. There is a lot of useful information for you. Much of the information is repetitive which is good because then you can trust what the articles are telling you. It is also helpful to see the information again because you might be better able to remember it if you see it repeatedly.
Should I Use a Broker to help me Buy Stock?
When you begin to think about learning how to buy stocks, you might say, "that is not for me", or "is there someone I can hire for that?' Yes, you absolutely can hire someone. That person will be glad to take your money and invest it for you for a fee. If that is the route you decide to go, that is perfectly acceptable.
However, do not go that route because you are afraid to learn how to buy stocks. I encourage you to try to learn the process, even if it is just the basics. Knowledge is power and with that knowledge, you can do amazing things. You have to take it upon yourself to learn.
There are many companies out there that make investing easy and fun. Some apps make games of it, or some invest your money in the places where you shop. The options are limitless once you decide how you want to invest your money. If you decide to leave it all up to a broker, there are companies and apps that can make that happen for you. If you decide you want to find some middle ground where you have a say in where the money goes, there are apps for that, too. If you want complete control, then go ahead with your bad self and there are apps for that.
Now, I want to give you some general money management information that is useful to know when buying stocks and dealing with finances in general. In the next two sections, I am going to use two terms that are somewhat interchangeable but I want to use them differently.
What Is Financial Planning?
When I talk about financial planning, I am talking about the big picture of your finances. I am talking about your money today and tomorrow.
Your Overall Finances
This includes items such as creating a budget (more below), saving for emergencies, saving for retirement, and have a good grasp of how to secure your financial future. This truly is the overall picture. If you feel like you do not have a good grasp on it, you can meet with a financial advisor. This person’s job is to advise you on your financial planning. In some cases, this person just handles it for you and gives you regular reports. I encourage you to take control of your own financial future. Even if you hire someone to help you, make sure that person is helping and teaching you. You are not going to learn if you allow someone to do it all for you.
If you truly want to learn how to buy stocks, you have to start with more basic finances. So, where do you start, right? I know finances make people nervous and they often do not want to talk about them because they are afraid. I am telling you, do not be afraid. Do not let fear stop you from controlling your future.
So, let’s start at the beginning, shall we? Before you start making investments you need to create a budget, in order to keep track of your income, then once you know where your money goes, you can calculate how much money you can save up each month. One of the best ways to start saving is by opening a savings account. Below you can find some of our top choices:
Is That Different From Money Management?
To me, money management is about understanding, managing, and planning your money. When I say money, I am referring to what you earn today. All of the topics I am going to list in the rest of this article are the pieces of your financial planning. The best place to start with your money management, which is the money you earn today is with a budget. I can almost feel your roll your eyes. The word budget seems to throw everyone into a place of discomfort. Now is the time to become comfortable with that discomfort and embrace a budget.
Create a Budget
You need to understand where you are spending your money and keep track of your expenses. I promise you this will teach you how to be better with money. The best way to do that is to create a budget for yourself. When you create a budget, you are taking a serious look at the money you are spending. Sure, I would love to spend money on absolutely anything I want but I do not make that kind of money. I am willing to bet that even though I do not know you, you do not make that kind of money either. Maybe you do and that is awesome for you, but you probably still need a budget.
So, back to the reality of money management. Before you can even learn how to buy stocks, you need to learn how to manage your own money. It would be a mistake to start investing money in the stock market without knowing if you even have any money to invest.
So, let us get to it. The simplest way for you to begin to budget is to write down every expense you have. Yes, every single dime you spend, I want you to write it down. Do not leave out anything. Create a column of all of your expenses and then add up that column. In the next column, write down all of your income and add that up. Now, subject your expenses from your income and that is how much money you have left every month. It might not be pretty, but that is your current situation.
How Do I Determine My Net Worth?
The numbers you now have in front of you may not be pretty, but they are a starting point. They do not have to be your endpoint. That is the point of this article, after all. Sure, it is a guide to help you buy stock in a smart way. What you may not realize is understanding your own money is a big piece of that. If you do not understand how much money you have, how can you know how much you have to spend on stock? See, it is all part of my plan.
Now, that you have created a budget, you see how much money you are spending each month and where. You also see how much money you have leftover each month after your expenses. Now, we can talk about how much you are worth. This may be just as surprising to you as your budget, but maybe not.
In its most basic definition, your net worth is your assets, which is all the money and items of value that you have, subtracted from your debt, or the money you own to others. Others can be banks, friends, or any other type of lender. To determine this, you add up the value of cars, houses, investments, money in all bank accounts and anything else that has monetary value. From that number, you all the money you owe on houses, cars, credit cards, loans, and any other money you owe. The dollar amount that is left is your net worth. Once you learn how to buy stocks, the money you have in stock can add to your net worth.
Can I Increase My Net Worth?
The good news is you absolutely can increase your net worth. The slightly uncomfortable news is it does take some work on your part. Unfortunately, it does not just happen. One of the best things you can do for yourself in general, and for your net worth, is to reduce your debt. It is no secret, people are drowning in debt. It is almost like an epidemic. Only you can stop the bleeding for yourself. Before you take on any more debt, such as a mortgage or a car loan, do some research.
Pay off Your Mortgage
When you want to obtain a mortgage, you need to be smart about it. For example, if you can handle a 15-year mortgage then do not take a 30-year mortgage. When you buy a house, you must make sure that you buy the house that you want. There is no reason for you to rush into buying a house. You should buy the house you really want and not rush into just buying a house. When you do purchase a home, you want to make extra payments whenever possible. This allows you to pay towards the principle and pay down the mortgage faster.
Decrease Your Debt
In an effort to pay off your debt, you need to focus on your credit card debt and paying it down. You should pay as much as you can each month on your credit cards to pay them off faster. In addition to decreasing your debt, you should also focus on increasing your assets. One way you can do this is by learning how to buy stocks.
Conclusion
Saying you want to learn how to buy stocks is one step in a multi-step process. You need to understand your goals and determine the path you want to take before you decide how to invest your money. Once you determine those goals, that lets you know if you need to be aggressive or conservative in your approach.
If you determine you only want to take a small amount of money and learn how to buy stocks, that is a completely different path. Perhaps, you want to take a small amount of money and play with it to learn the best way to buy and sell stocks. There are many options available to you no matter how you want to proceed. You have to decide for yourself what your path should be and then take those first steps.