Stock Market Investing Basics

So you are interested in investing but not sure where to start? The vast majority of basic investing information, along the extensive variety of investment options that are available, can be intimidating to most investment beginners and can actually prevent you from taking your first steps into investing for yourself. Don’t be discouraged – it only takes knowledge of a few stock market investing basics and investment tips in order for you to getting investing in your future.

Know Your Basic Investment Goals

When you are ready to make your long-term investment, you need to know how to choose the right ones to invest in. The first step is to know what your basic investment goals are. Doing so will allow you to efficiently manage your own money in a way which will get you the most out of your returns while also limiting unwanted investment risks.

Ask yourself the following questions to help determine your investment goals:

  • What are you currently saving for?
  • How much do I initially have to invest?
    • Do you already have money saved for investing?
    • Is your credit card debt under control? It makes no sense to invest if you have thousands of dollars in credit card debt. You don’t have to be entirely debt-free, but you should make serious attempts to reduce your debts each month before investing.
    • Do you have an emergency fund (at least 3-6 months of living expenses) already saved?
  • How much time do I have to reach each investment goal?
    • Are you young or are you approaching retirement?
    • The more time you have to ride the ups and downs of the start market volatility, the more risk you can assume.
  • What is your investment risk tolerance?
    • Conservative (low risk, predictable income)
    • Moderate (medium risk, normal income producing)
    • High (high risk, potential for high returns)
    • By understanding your risk tolerance level, you can eliminate any type of investment that does not fit your criteria.

Your personal goals are usually specific things (buying a new car, put a new roof on your house, etc.) that you want to do with their money. As you move through various life stages, your needs and financial goals will change many times. Your investment goals should closely relate to your financial goals. Learning the stock market investing basics and defining each of your investment goals will determine the amount and liquidity of the money you need to invest as well as the number of years that are available for your investment to mature and grow in order to meet your goals.

The key to investing successfully is to follow your overall comprehensive plan according to your personal and financial goals. Where you start will depend on your particular situation.

Basic Investment Choices

Confused about the variety of investment choices available and which ones are right for you? Knowing all of the basic investment choices that are available to you can be very overwhelming. For many people there are so many various investment options to choose from that it is incredibly difficult to know just how to actually begin.

There isn’t a magic answer as to where to start investing. The type of investment you choose will depend on the amount of time available before you need the money. Stocks are usually considered to be long-term investment. It is generally in your best interest to plan on holding onto stocks or mutual funds you invest in for at least 5 years.

To reduce the risk you have with losing money in your investments, it’s best to diversify your investments or to spread your money over several different investment types. For investment beginners, it is widely recommended to start investing in stock mutual funds instead of individual companies because it automatically diversifies your portfolio and reduces the risk on your money.

Good investment advice is to start investing in all different areas if you can. Save for your retirement; save for your children’s college fund; save all you can for all of your other goals. Having a plan is very important and too many people today going into an investment blindly.

Investing makes your money work for you today, so you will be financially protected tomorrow. Remember that it is critical to take the time to fully understand and learn stock trading by clearly defining your investment goals and developing a strong investment plan. Don’t always look for the quick stock tip to make a fast profit. While making a sudden profit can be an exciting part of investing, understanding the stock market investing basics first is the key to building a successful long-term strategy.

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