Best Ways to Invest in the Stock Market
25.07.2019 by Jack H
The stock market is a way to get big, fast. It is also a great way to become broke in the blink of an eye. There is a reason why those who work professionally on wall street as stockbrokers retire so early; it’s because they burn themselves out. A professional stockbroker is on the job 24/7 and has little time to do anything else. This has caused a hard-party lifestyle that is unsustainable and dangerous, and they’re the ones who work for a company and have a degree in the subject.
That does not mean, however, that the stock market is barred from regular people. Anyone can invest in a company, and in many ways, they should and do.
Take, for example, a savings account you set up for your kid so that they can go to college. In most cases this account is not just where you put money in, it’s an investment. Your bank will invest the money you save into what is known as a “blue-chip stock”. These stocks are backed by well-established and successful companies that rarely dip in value.
Examples of great blue-chip stock to invest in are utilities. The power company that owns and operates the hydro facility in your city will be a great choice. Though they can still fail, technically, it is incredibly rare.
To help you learn a bit about the stock market and learn how you can best start investing in the stock market, follow this easy guide:
Why Invest in the Stock Market
Investing in the stock market is just one way you can make your money do more for you. There are many financial benefits to doing this as well. For example, you can invest your money to reduce the overall tax you pay. This isn’t a long-term solution (you’ll need to pay tax on your earnings once you take the money out) but it can help. Then, of course, there is the fact that stock markets, when chosen carefully and correctly, increase your monetary stake.
Long Term Investments
The stock market can actually be a great place for long term investment plans. This means avoiding the roller-coaster market of penny stocks and instead investing in more stable companies that have been around for decades and, though their value doesn’t increase substantially, does gradually rise.
Build Up an Investment Portfolio
Investing is also a great way to build up your portfolio. By investing in multiple types of stock you can offset losses and still make a profit.
Done right, there can be a huge payoff. Your initial investment can double and even quadruple. Though this can happen without you looking at it, that tactic is dangerous. In most cases, you will want to monitor your portfolio so you know when to sell and when to buy. Knowing when to do these actions takes practice, know-how and knowledge of the market, and great intuition.
Things to Know About the Stock Market
Before you get ahead of yourself and jump into the world of trading you need to be fully aware of the consequences and how it works. You can start by reading up online or even taking a few classes. There are many free resources you can turn to for more detailed advice as well, though they will never directly say what to do or what stocks to invest in, as this is illegal.
To help you get a grasp on some stock trading basics, here are three things to remember:
Blue Chip Stocks
As stated before a blue-chip stock is an investment in an established, wealthy company. It earned the name because it's stock market value is very stable. Though it won’t jump up in price and make you a fortune, it will increase over time and rarely has its value fall to the floor.
Utilities are a great example of blue-chip stocks. These blue-chip stocks are also what you invest in most often when you start a savings account, say, for a child going to university or for your own retirement. These accounts “mature” on a certain date, before which time you cannot take money out, only put it in. This is to give you a healthy return on your investment.
Alternative options for funding investments
To really make a healthy return on this investment, however, you are going to want to invest a sizeable sum from the start. This way you can start earning interest right from the start. You can either put your savings in, or if you don’t have savings right now, you can take out a loan on your equity.
What are my options?
Taking out a loan on your car can help give you a healthy sum to invest in. You can then pay back your loan without losing access to your car. This gives you flexibility, and can actually have a positive impact on your credit history, assuming that you pay on time every time a payment comes around.
Penny stocks are the exact opposite of a blue-chip stock. They are very cheap because they are connected to new or volatile companies that were taken delisted from exchanges. You need to be careful when buying these, as they can often be a scam.
Chosen right your investment can skyrocket. That being said, when a company is doing well you can also buy into it at the peak price and then immediately watch it crash and the value you invested go with it.
Types of Stock
There are many different types of stock. Blue chip and penny stocks are two, but in the normal market (with companies that are represented on the stock exchange) there are different types. Preferred stocks are those that come with some degree of ownership, whereas common stocks are open to the public. Then you also have growth stocks meant to grow your income, defence stocks, yield stocks, and new issue stocks. Know what each one is before you invest.
The Risk Involved with the Stock Market
There is always risk involved with the stock market, which is why everything you read online or hear about the stock market is advice only. It is still up to you to invest and you and you alone are the only ones responsible for that investment.
Due to the volatile nature of the stock market, you never want to use it as your savings account. Though yes you can invest savings and wait for it to mature through your bank, it is wise to always have accounts that have the money you can access right now. A stock could fail and drop to pennies on the dollar, but so long as you have your own personal emergency fund you will be all right.
Best Ways to First Get Into the Stock Market
To get into the start market you will first want to read up and understand it a bit. Once you have done that you can start using these tactics to build up your investment portfolio:
There are many apps out there that can help you round up your payments. What this means is that every time you buy something your account will automatically deposit the rounded up sum into your choice of stock.
If you buy a coffee for £2.50, then it will round up and invest the other 50 cents into the stock of your choice.
If you don’t feel comfortable doing this automatically then you can do it manually at the end of the day. It’s a great way to make each investment feel less painful and can help get you in the habit of regularly depositing money into the stock market.
Invest in Companies You Believe In
No matter what you should always invest in companies that you believe will do well. Investing for the sake of investing, even if the stock is cheap, is not a smart move. Though you might see some return, expecting it is like buying a lottery ticket and immediately asking when you are due to collect your prize.
Don’t gamble your money in the stock market. Always make sound decisions and, most importantly, never invest money that you are not 100% ok with losing. If you go in with that mentality then you can easily use the stock market to increase your assets without threatening your way of life.
Invest to Help a Company Grow
You can invest to make a company grow as well. You need to be very careful when doing this, as it could result in a “pump and dump”. This essentially means that the value of the stock is artificially inflated, and once it reaches its apex investors pull out for a quick spot of cash. This is illegal.
Hire an Investment Broker
When in doubt leave the actual investment to an investment broker who will invest your money for you based on their own research. It is not illegal to use them.
You are responsible for your investments, which is why you need to always research the companies you are investing in and try to gamble on their potential. The only way to make a lot of money on a stock very quickly is to invest when a company is new and have it skyrocket in value. That is why you hear about Google or Apple stocks. If people had only invested in them when they were new or bankrupt they would be millionaires.
Hindsight is easy. Knowing which stocks to invest in now is difficult. Always commit to learning and don’t invest all your money at once. If you know someone who is starting a business, and you believe in that business 100%, then take out a loan so that you can invest in the company without denting your savings.