Getting Started in The Stock Market - How Much Should You Invest & With Who?

Thinking about investing in the stock market? Not sure where to start? Here is a step by step guide to getting started in the stock market.

Step One: Evaluate Your Financial Situation

Before getting started in the stock market, it is important to determine whether or not you can really afford to invest in stocks. Start by looking at both your savings and your debts. If you have credit card debt or an auto loan, it would make no sense to invest in the stock market. The average annual stock market return is seven percent. If the interest rate you pay on a credit card or auto loan is any higher than that, you will be much better off paying down your debt versus investing in stocks.

Step Two: Decide What to Invest In

The next step involves deciding which stocks to invest in. You have two main options: straight out stocks or mutual funds. Stocks are shares of ownership in a company. A mutual fund is pooled money from a large group of investors that is invested in stocks, bonds, and other securities. Mutual funds are often the best choice for beginning investors because they are managed by someone else and are easy to invest in. Whatever investment option you choose, be sure to research your picks before you buy.

Step Three: Decide How Much to Invest

When you have chosen your investment vehicle, the final step is deciding how much to invest. A good rule of thumb is to not invest any more than you can reasonably afford to lose. No stock pick is guaranteed, which means it is just as easy to lose money as it is to make money. It is also important to think about diversification. Spreading around the money you can afford to invest is the safest way to get started in the stock market.

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How Do I Get Started in the Stock Market?

You would like to invest some of your money. You want to plan for your retirement. You want to make some additional money. You ask yourself, "How do I get started in the stock market?"

What are stocks?

When you buy stocks, you are buying little pieces, or individual shares, of ownership in a company. If the value of your stock rises, you will make money. Otherwise, you could lose money or break even, depending on what the value of your stock does. If you own 100% of the available stocks in a company, guess what? You are the owner. Getting started in the stock market can seem complicated, so naturally you ask, "How do I get started in the stock market?"

How much will it cost to invest in the stock market?

How much it will cost will depend on how many shares of stock you want to buy and how much shares of stock cost. It is possible to open up an online account to buy stocks from a brokerage company for as little as $5. If you want to request quotes for a particular stock, you will receive an ask price, which is the lowest price a particular stock could cost you and a bid price, which is the most you could hope to sell the stock for.

How do I know which stocks to buy and how much money can I make?

There are more than 8,000 stocks available, so it is not surprising you wonder, "How do I get started in the stock market?" There are a lot of ways to determine which stocks are the best to invest in:

o Get advice from financial experts, like a broker.
o Invest in the same stocks that your retirement money is invested in, if you are making money.
o Listen to the advice of experts on radio, television, and in newspapers and magazines.
o Buy stock in successful companies, those whose stock value has been typically increasing.
o Read online sites about the stock market and take a class or attend a seminar about investing in
stock market.
o Read online reports of individual companies filed with the Securities and Exchange Commission.
o Consider the stocks of local companies you trust.

Typically it is not unrealistic to make 10% on your stock market investments, if you invest in companies whose stock value usually increases.

Develop Financial Goals

Talk with a broker and financial expert to determine how much money you would like to and need to make. Look at what you need to make money for-retirement, or some other reason. If you are married, talk everything over with your spouse. Be prepared to hold onto any stock you buy for at least three years, maybe five, before selling.

Discount Brokerage

It is good to get advice from a trusted financial advisor, but if you learn enough about stocks that you feel comfortable investing, you can do an Internet search for discount stock brokers and invest yourself and save money on brokerage fees.

Lucy Bushman is an accomplished niche website developer and author.

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