As most already know, investing in stocks is a pretty good way to make money and build wealth. Even when the market is on a down-turn, stocks are great for long-term investors. When the stock market is down, stocks usually go “on sale”.
For the beginners who want to cut their teeth on stock market investing, one good way to get things going is to put some money in an investment account at which point your can purchase stock or mutual funds. In fact, with a brokerage account, you can start investing for the cost of one share.
We’re going to review how to invest in stocks as a beginner to decide what really is the best way to go for you.
We’ll talk about what types of stocks provide you the best investment returns (ie, dividend yield) and the reasons you should make them a priority.
At the end, I’ll answer some of the most frequently asked questions regarding stock and investment advice in general.
And most importantly, I’ll show you the exact system I used to build my own internet marketing business to over $40,000 a month in mostly passive income.
When it comes to stock investing, there a few ways to look at it. Consider the following scenarios regarding how you want to invest to see just how involved your want to be with the stocks you purchase.
Scenario #1: “I’ll choose for myself which stock and stock funds to invest in.”
Just so that we’re on the same page, here we’ll go over all the details that investors will need to understand regarding the right stock to pick and how to compare and contrast different account types.
Scenario #2: “I need to have a stock expert to run things for me.”
If this is you, then you should take a look at a robo-advisor. This sound like the perfect candidate for you, and this type of service is widely offered by many brokerage firms to invest your money.
Scenario #3: “I think I’ll start investing with a company-sponsored 401(k).”
Most beginners decide to start investing this way. With a 401(k), a lot of new investors are able to learn many of the following solid investing methods:
After you have decided which scenario best fits you, it’s time to get an account.
When it comes down to it, if you want to invest in stocks, you’ll have to have an investment account. For those investors who want to do things on their own, they would need a brokerage account. For those who need direction, getting an account through a robo-advisor is the better way to go. We’ll go into each of these options.
Quick Note: You need very little money to open an account whether it’s through brokers or a robo-advisor. However, we would advise against opening an account using credit cards.
If you’re looking for the least expensive and fastest way to buy stocks and mutual funds, a brokerage account is the preferred choice. You can start an personalize retirement account (IRA), or you can start and brokerage account if you have been saving for a while with your employer-sponsored 401(k) program.
If you choose to open a brokerage account, you’ll want to research brokers regarding details about investor costs, accounting fees, and trading commissions. You’ll also want to look into commission-free ETFs if funds is your forte.
You really don’t have to be a certain age to buy and sell stocks, even minors can owns company shares. But most brokerages do require that you be at least 18 to own stocks and 21 to buy them. In addition, you do not need a great credit score to buy stocks, but brokerage firms will run a credit check before opening an account for you.
The great thing about a robo-advisor when it comes to stock investing is that you don’t have to do all the research on the investments that you want. You get total investment management with a robo-advisor. These services will provide your survey to fill out with all of your investing goals and then create a portfolio for you that will strive to meet those goals.
Although this may sound like it could cost a pretty penny, robo-advisors actually cost less that what it would be to have a “real person” investment advisor work for you. In fact, the majority of robo-advisors will only charge you about 0.25% of the balance of your account. On a side note, you can also create an IRA account with a robo-advisor if you want to.
As a matter of fact, if you open an account with a robo-advisor you really don’t need to read any further, because it takes care of everything for you, so you don’t have to.
So you would rather do things on your own, huh?
I get it… and stock investing really doesn’t have to be all that difficult either. For most people who are curious about stock market investing, it usually involve the following kinds of investments:
With mutual funds, you’re able to buy tiny pieces of multiple stocks in one single purchase. Exchange-Traded Funds (ETFs) and Index funds are a type of mutual fund in which you can follow on an index. Examples of this would be when a Standard & Poor’s 500 fund essentially duplicates the index by purchasing stock in the companies it reviews. By investing in these types of funds, you actually own a piece of many different companies. You’re able to combine these funds into one diversified portfolio. Keep in mind that stock mutual funds also go by “equity mutual funds”.
Individual Stocks. If you really have your eye on any given company, you have the option of wading in the shallow end of the stock trading pool buy purchasing a few shares at a time. Now, you can build a diversified portfolio from multiple individual stocks, but it may require a significant amount of money.
The advantages of stock mutual funds is that fact that they are naturally diversified which invariably decreases the risk on your end. As most investors realize… especially if they’re investing for their future retirement… building a portfolio of predominantly mutual funds is the best option.
The thing is however, mutual funds typically don’t see a huge spike in value like you would see in individual stocks (even penny stocks). But even if you could see a huge growth with an individual stock, the chances of you hitting it big with individual stocks isn’t likely to happen.
When new investors decide to jump into the game, they typically have 2 questions:
How much money is needed if I want to start investing in stocks?
If you’re going to buy an individual stock, the money you’ll need will be based on the price of the shares, which can vary widely from just a few dollars to several thousands of dollars.
Now, if you have limited funds, then a mutual funds investment (exchange-traded funds) would be a better way to go. The minimum price for mutual funds is usually around $1,000+. On the other hand, you can trade ETFs like a stock in that you can buy them for a share price, usually under $100.
Exactly how much money will I invest in stocks?
If you’re plan is to be investing in funds (which is what most investors prefer), you can appropriate a significant part of your portfolio towards stock funds especially if the future is your primary concern.
For example, a 30 yr old investing primarily for his or her retirement could allocate 80% (or more) of his portfolio towards stock funds. The rest can be used for bond funds, except for individual stocks which really should only be kept to a smaller percentage of your portfolio.
Even though there are many different strategies and specifically approaches when it comes to stock investing, the most successful investors are the ones who have focused on stock market investing basics. What I mean is that mutual funds should make up most of your portfolio.
As a matter of fact, Warren Buffett one said that low-cost S&P 500 index funds is the best type of investment for the majority of Americans, and only choose individual stocks if your sure of the company’s long-term growth potential.
I know this might be hard to believe, but the best thing for you to do once you start investing in stocks or mutual funds is to simply forget about them. Unless you’re involved in day trading, just resist the urge to check on your stocks on a daily basis.
Now, I know I said that you shouldn’t worry yourself about how your portfolio is doing (especially if you want to maintain sanity), but there will be times in which you’ll want to check your stocks, which is OK.
Checking up on the mutual funds and other individual stocks portfolio a couple of times a year to make sure your investment goals are still on track should suffice.
Here are a few things to keep in mind…
If you’re getting pretty close to retiring, then it might be a good idea to transfer a portion of your stock investment to a more conservative investments. Diversification should be your aim. So if your portfolio is mostly involved in one industry, a good idea would be to buy stocks and funds in a different industry.
Lastly, you should consider geographic diversity as well. It’s been suggested that stock purchases outside the U.S. should make up about 40% of your portfolio stocks. International stock mutual funds is certainly the way to go for a stable portfolio.
For the most part, real estate investing is usually broken down into two wide-reaching categories:
The pros and cons for investing in stocks are pretty significant, so take not before you take the plunge:
You can certainly make money with stocks and real estate, but if you’re gonna put in the amount of work and time to become an investor (which, trust me, isn’t easy), you might as well bring in some REAL money.
The program that helped skyrocket my online business to $40,000+ per month teaches some of the same investment skills, but shows you how to monetize them in a much, MUCH more profitable way.
Simply put, a brokerage account is used by investors to buy and sell stock, mutual funds, bonds and other securities. With a brokerage account you’re able to move your money in and out among different accounts (sort of like a regular bank account), but it differs from a bank account in that you have access to the stock market.
Also, with brokerage accounts, you can be taxed because the income you receive is considered to be capital gains. Now, contrast this to a retirement account (ie, IRAs) which are better for investing and retirement savings due to the various rules for taxes and withdrawals.
There’s no shortage of licensed brokerage firms to choose from where you can have a brokerage account created. They can be a bit on the pricey side for a full-service brokers to the less expensive discount brokers or online brokers.
With many brokers, you can open an online brokerage account fairly quickly and you really don’t need a lot money to do it. For that matter, there are quite a few brokers that allow you to open an account without a deposit.
But keep in mind..
You will need to have some money in your account before you make any purchases. So be sure to transfer some money from another brokerage account, or from a checking or savings account before you get started. This can also be done with a check by mail.
The money in your brokerage account is YOUR money, and you can buy or sell these investment any time you want. The broker is simply the middle man between you and the investments you want to buy.
You can have as many brokerage accounts as you want, plus you can also deposit as much money into your brokerage account as you want. There’s typically no fee for opening a brokerage account.
Everything that we’ve talked about so for about investing in stocks is primarily for new investors. The one that that every beginning investor that remember is that, for the most part, investing isn’t really isn’t as difficult as some would believe it is.
The main reason for this is because of all the tools you have at your fingertips. Of course stock mutual funds are inherently a low-cost option for beginners interested in investing in the stock market. You can get these funds in any taxable brokerage account like an IRA or 401(k). Another good place to start is in an S&P 500 fund where you can buy smaller portions of ownership in 500 of the countries largest organizations.
You could also take a look into getting a robo-advisor to build and handle your portfolio for a modest fee.
The bottom line is that you don’t need to be an expert to get started investing.
But there are a few hurdles when it comes to investing with little money
On the bright side…
They’re pretty easy to overcome.
Number one, you need a minimum amount with most investments… and number two, it’s a little difficult to diversify with little money. By definition, diversifying your investments means having your money spread around. It’s pretty difficult spread out your money when you don’t have much of it.
Both of these issues can be solved by investing in ETFs and stock index funds. Even though it might require $1,000 or more to invest in mutual funds, the minimum for index funds are usually much lower, which can be even lower since you can buy ETFs for a lower share price). There are even brokers that provide index funds with absolutely no minimum, two of which are Charles Schwab and Fidelity.
Another solution for diversification is index funds since they have single funds that have so many various stocks.
Finally, the obvious thing about investing is that it requires playing the long-term game. You don’t want to invest any money that you will need in a month or so, and this includes the money you have set aside for emergencies.
So long as your able to leave your money sitting in an investment account for five years at the very least.
What’s so special about five years?
Primarily because you don’t see many downturns in the stock market that go beyond that timeframe.
The key here, however, is not to start trading in individual stocks, but rather look into stock mutual funds. These mutual funds give you the ability to buy stocks in a larger portion in just one fund.
Now, can you build up a diversified portfolio from individual stocks?
Yeah, you can do that…
But this will take a bit of time.
Managing a portfolio do involve a good deal of research that stock mutual funds (ETFs and index funds) can do all the heavy lifting for you.
At Scam Risk, we believe that low-cost mutual funds are the best route to go when it comes to the stock market. Purchasing ETFs and Index Funds rather than individual stocks enables to you buy huge portions of the stock market in one fell swoop.
In a nutshell, this is really just a matter of how much risk can you handle and how much time are you looking at in order to reach your investing objectives.
Regarding the time issue, if your investing objectives are 30-40 into the future, then we suggest you choose stocks and more specifically, mutual funds.
Now, regarding your risk tolerance…
Just understand that there is an ebb and flow in the stock market. So, if you’re an anxious person that tends to freak out at sudden yet temporary downturns, then you should consider being more conservative with your stock investing.
I know that I’m repeating myself, but at Scam Risk, we believe that the best approach is to invest in stocks through stock mutual funds, ETFs or index funds. The S&P 500 index is a good option since it holds stocks for over 500 companies.
If you like to live a little more dangerously with your stock picking, you can do this without the fear of losing your shirt by purchasing individual stocks but only appropriating about 10% of your portfolio for it.
I would tread on this a lightly.
Although we believe that stocks are better for novice investors, we don’t believe that trading is something that beginners should be doing. You can do this a little later on in the future if you like, but for the time being we suggest you buy into stock mutual funds for the long haul.
What if you could have 10 house or rental units that you could charge anywhere from $750-1000 per month?
That’s $7,500-10,000 per month in passive income!
What if you have 100 rental units?
But instead of spending $Millions to build house or apartment complexes… you spend a couple hundred dollars to build websites.
You then get those websites ranked in the search engines for specific home-based services that customers are searching for.
Next, you find local business owners who are looking for customers and are willing to pay you for their information.
You’ve just created Digital Real Estate that is potentially earning you 4-5 figures in PASSIVE INCOME on a monthly basis without spending a single dime on ads.
With stock investing, you have to compete with thousands, if not millions of others who are selling the SAME products and services to the SAME customers.
With Digital Real Estate, the competition is virtually zero and your profit margins are 85-90%.
Now, I could go on and on, but I’m sure you have tons of questions about how to create Digital Real Estate assets and start building YOUR digital empire!
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