Do you have some money to invest? Have you read these 16 great ideas from eight top advisors? What about pieces of advice from these people? Oh, you want to start with a small amount of money, right? We can help you with that, but you have to know one thing: the stock market is not just for the rich people! The first thing you require here is a strategy and, of course, some patience, discipline, and diligence. Then you should follow these steps.
You have to ask yourself some questions first
The actual question here would be: Can you handle a risk? You have to realize that investing in the stock market necessarily includes taking risks, i.e., the risks of losing money. So, are you the right kind of a person for it?
“Unless you can watch your stock holding decline by 50% without becoming panic stricken, you should not be in the stock market.” Warren Buffett
Visit some banks
Different banks offer different accounts and varied conditions for this type of investments. These are the types of accounts:
- A taxable account is an account where all the investment income earned is taxed in the year it was received.
- A traditional Individual Retirement Account or IRA is for tax-deductible contributions from which you cannot withdraw funds until you reach your retirement age. Well, you actually could if you paid a penalty.
- A Roth Individual Retirement Account doesn’t allow tax-deductible contributions. However, it allows tax-free withdrawals in retirement. Roth IRAs are good for transferring money to your heirs.
Don’t put all your eggs in one basket! You could either invest your money in many different stocks or different industries within one stock. You could buy a single stock, but that exposes you to the risk of losing significant value. On the other hand, If you buy many stocks over many different industries, for which the risk is smaller.
Explore all of your options
Although there are various types of investments, here, we will focus only on the stock market. Three primary ways of gaining stock market exposure are:
- Concerning an ETF index fund, which is a passive portfolio of stocks or/and bonds that aim to accomplish a set of objectives. In this option, the fees are small, and the client pays very little for the management services.
- Concerning an actively managed mutual fund. A mutual fund is a pool of money from a group of investors. It is used to purchase a group of stocks or bonds, following some strategy or objective. Her,e you have a professional management since these funds are being surveyed by professional investors. They invest your money in a diversified way, and they respond to changes in the market.
- Concerning the individual stocks. But beware! You need much time, knowledge and full commitment here! Also, there are higher risks, which can be reduced by investing less than 20% of your portfolio in one stock.
Find a broker!
Instead of a broker, you could also find a mutual fund company. They serve to make investments on your behalf. But there are also some costs here, so you should focus on both cost and value of the services provided.
Some types of accounts allow you to put your money on deposit, thus making purchases with very low commissions. Your broker will tell you this! On the other hand, if you want professional advice regarding the investments, you may opt to settle for a place with higher commissions to get a higher quality customer service. You should also know that different brokerage houses have different pricing plans. Pay much attention to the details concerning the products you plan to use most frequently.
Don’t loose your patience!
Some people become obsessed with the potential income, but this is the number-one obstacle that prevents investors from realizing the real effects of compounding. Of course, it is hard to watch a small balance grow slowly, but don’t lose your patience. Remind yourself often that you are playing a long game here, and that the absence of immediate, massive profits should not be seen as a failure.
“Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.” Warren Buffet
Concentrate, collect all the information from the previous years and let your investment build up slowly. Don’t be afraid of the fluctuations and success is guaranteed!