What is the Stock Market?
What Are the Options for Investing in the Stock Market?
You’ve got thousands of investment options — what should you choose? Here’s just a small sliver of popular investment options:
Stocks:
Stock shares all together form ownership in a company. A single share of stock represents one small portion of ownership of the corporation in proportion to the total number of shares.
Mutual funds:
Bonds:
Annuities:
Exchange-traded funds (ETFs):
Money market funds:
U.S. Treasuries:
How to Invest in the Stock Market
Here are some steps you can take to invest in the stock market. These are general guidelines, assuming that you’ve chosen to DIY invest. If you choose to invest with a financial advisor, he or she will take these steps with you.
Step 1: Gauge your risk tolerance and timeframe.
What are the best saving and investment products? The answer depends on when you need the money and what your goals are.
Step 2: Choose a broker.
Choosing a broker is one of the most important decisions you make as an investor. Unless you buy stocks directly from the company and bypass a broker altogether, that is. In most cases, you need a broker. The broker influences a lot:
- What you pay
- Your investment options
- The tools available to you
- The education options open to you
- Your comfort with the investment options you’ve chosen (for example, if you choose to trade forex and barely know what a dividend is, you might be in over your head. Might.)
Step 3: Open an account.
It’s easier than ever to open an account online. New accounts require you to fill out identifying information like your Social Security number and driver’s license. You may need to sign additional forms such as margin privileges, net worth, employment status, investable assets, and investment goals, and more. However, this process is usually quick!
Step 4: Fund your account.
Next, you’ll need to invoke a deposit or funds transfer. Your broker will guide you through the process. Once your account is fully funded, you can begin investing. Some brokerages require you to have a minimum amount in your account before you can invest.
Step 5: Choose your investments.
It’s research time! Read everything you can your hands on about various ETFs, stocks, mutual funds, bonds, etc. Whatever type of instrument you think you might want to add to your portfolio, learn about its costs, prospectus (an information packet), and more. Learn which companies make up the ETF or mutual fund if you’re considering bundled investments.
Step 6: Check on it every once in a while and rebalance when necessary.
It’s a good idea to check in. Just like you wouldn’t want to drop your kid off at the babysitter’s house and never ask how things are going, you also don’t want to abandon checking your accounts. Over time, shifting markets can push your portfolio farther from your goals and risk level.
Tips for Getting Started
Need a few more tips to get you on your way? That’s perfectly natural if you’re a tentative beginner. Learning how to start investing can seem like learning Greek when you’re old — not easy to do.
Tip 1: Learn the lingo.
Speaking of learning Greek when you’re old — that’s actually an excellent first step. You need to learn the lingo of investing.
- Buy: Refers to buying shares or taking a position in a company.
- Sell: Liquidating shares when you’ve made the money you want or want to cut down losses.
- Ask: What people who are looking to sell their stocks are looking to get for their shares.
- Bid: The amount of money you are willing to pay for a stock.
- Bull: A market condition in which investors and traders expect prices to rise.
- Bear: A market condition in which investors and traders expect prices to fall.
- Limit order: An order type that executes at the price placed for buy or sell.
- Market order: An order type that executes as quickly as possible at the market price.
- Capitalization: What the market thinks a company’s value is.
- Dividend: The portion of the company’s earnings paid to shareholders.
- Broker: A broker buys and sells stocks on your behalf.
- Exchange: A place where different types of investments get traded.
- Portfolio: Your own personal collection of investments.
- Margin: Borrowing money from the broker to buy shares.
- Stock symbol: A one-to-three character alphabet root symbol that represents a company listed on the exchange.
Tip 2: Choose a brokerage you’re comfortable with.
Are you more comfortable with barebones Robinhood or a brokerage with all the bells and whistles, like TD Ameritrade? If you’re having a hard time deciding, consult Benzinga’s Best Investment Firms article for guidance.
Tip 3: If this all looks like Greek to you, get a financial advisor.
A financial advisor will lay it all out for you. Find an advisor who answers your questions, spends time with you during your first free consultation, listens to your risk tolerance, time horizon and concerns, and more. Ask around in your community for more.
Tip 4: Don’t forget to think of loved ones in the process.
As you invest, it’s a good idea to make sure you also set up the right protection for your family and yourself. Don’t forget about health insurance, disability insurance, and life insurance. Sproutt can help you cover your family when you die. Answer a few questions about yourself, select the right insurance plan for you, and apply online.
Invest in the Stock Market Like a Pro
You want to shoot for overall portfolio growth and capital preservation whether you choose a full-service investment firm or go the DIY route.
