A Beginner’s Guide
TO INVESTING IN STOCKS
Savira Auliyah
Investing is an act of allocating multiple types of resources (usually money) with an expectation of generating an income or profit (Picardo, 2021). In the process, the activity of investing surely requires an investment. An investment itself is an asset or item acquired with the goal of making income or appreciation (Hayes, 2021). There are at least seven types of investments: stocks, bonds, funds, investment trusts, alternative investments, commodities, and, lastly, options and derivatives. The activity of investing also utilizes various types of skills and knowledge in order to succeed. Of course, beginner investors can come from various types of backgrounds; some of them possess an economic background and some others do not. In any case, it is dire to know the basic steps of investing.
1
Find out your investing style
Before indulging yourself into any investing activity, you need to know how you want to invest your asset. There are two types of approaches to stock investing; to choose stocks and stock funds on your own OR to hire an expert to manage the investing process for you (such as wealthfront). If you decide to use an expert’s service, you have to prepare some additional money for the management fee. Yet, if you decide to invest on your behalf, you do not need extra money for service, but you have to make sure that you have at least the adequate knowledge to perform an investment activity (O’Shea, 2021).
2
Research the stocks before buying them
Do not dive into something you do not comprehend well. First, identify the company you want to invest in. Make sure you know the company well. You can do this by choosing a company based on your experience as their customer, meaning that it is best for you to choose a company in which its service is reliable for you to be considered. Second, find the annual report of the company that consists of management’s annual letter to shareholders to assess the company’s performance. (Davis, 2021). The annual report to shareholders will give you a view and perspective about the things that are happening in their company, such as market environment, operating results, interest rates, dividend per share ratio, price earnings ratio, dividend yield, dividend cover ratio, etc. Not until you are sure that there is a reasonable profitability prospect, you can move on to the next step.
3
Choose your investing account
If you want to invest in stocks, you must have an investment account. If you invest on your behalf, you need a brokerage account. If you invest by using expert services, you need to open your account through your robo-advisor. Both robo-advisor and brokerage account allow you to open an account with a little amount of money (O’Shea, 2021a). You are free to choose, but make sure that the broker should offer a reasonable investment minimum, high quality trading tools, no hidden account fees, and your online broker must have access to customer service. Several recommendations for choosing your online broker are Ameritade, Interactive Brokers, and extrade (Voigt, 2021). Whereas for the Robo-advisor you can choose between SoFi, Wealthfront, Betterment, or Vanguard (Benson, 2021). Of course, be aware that you have to surely settle the types of investing style before making your account because once you have settled your account, there is no going back.
4
Make Your Investing Account
The account is basically a platform that you will have to use throughout your investing activity. So make sure that you have followed the precise instructions in the making of the account. Here are some steps that you should follow for making your investing account.
If you are choosing a brokerage account, these steps are for you (O'Shea, 2021b):
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Fill the online application, you will only need 18 minutes to do this.
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You will need to initiate a deposit or funds transfer. Notice that some brokers might want you to verify a transaction. If that is the case, you’ll have to wait until the broker deposits a small sum in your bank account. Then you will confirm the transaction by telling the brokerage the exact amount that is deposited.
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Once your transfer is complete you can begin investing. Good Luck!
If you are choosing Robo-advisor, here are the steps you need to take (Santander, 2021):
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Sign up to the robo-advisor that you chose. The process involves a questionnaire that is designed to help the software understand your current financial state, risk tolerance, and financial goals. The questionnaire will help robo-advisor to choose whether you should take taxable brokerage account or tax-advantaged individual retirement accounts (IRAs)
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Choose the portfolio that matches your investor profile.
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Open an account with the bank that you choose to deposit the money you are going to invest.
Those are four basic tips for those of you who wish to begin investing in the near future. Remember that you have to always keep eyes on the ongoing trade, make sure that you do not lose anything. Eliminate every threat that can jeopardize your income or profit. But most importantly, learn from your mistakes that you surely will do in your trading activity. Be aware that something can grow wrong in the nick of time, so you do not want to underestimate a red flag that occurred in your investing process, if something is alarming do something about it immediately. So, Are you interested in investing anytime soon?
References
Benson, A. (2021, August 12). 11 Best Robo-Advisors of August 2021. Nerdwallet. https://www.nerdwallet.com/best/investing/robo-advisors
Davis, C. (2021, July 21). How To Buy Stocks. Nerdwallet. https://www.nerdwallet.com/article/investing/how-to-buy-stocks
Hayes, A. (2021, February 25). Investment. Investopedia. https://www.investopedia.com/terms/i/investment.asp
O’Shea, A. (2021a, July, 19). How To Invest in Stocks. Nerdwallet. https://www.nerdwallet.com/article/investing/how-to-invest-in-stocks
O’Shea, A. (2021b, Juny, 30). What Is a Brokerage Account and How Do I Open One?. Nerdwallet. https://www.nerdwallet.com/article/investing/what-is-how-to-open-brokerage-account
Picardo, E. (2021, April 30.) Investing. Investopedia. https://www.investopedia.com/terms/i/investing.asp#:~:text=Investing%20is%20the%20act%20of,later%20at%20a%20higher%20price
Santander. (2021, January 25). Robo-advisor: what is it and how do I use it?. https://www.santander.com/en/stories/robo-advisor-what-is-it-and-how-do-i-use-it
Voigt, K. (2021, Augustus 9). 11 Best Online Brokers for Stock Trading of August 2021. Nerdwallet. https://www.nerdwallet.com/best/investing/online-brokers-for-stock-trading