(Stock Trading) The past two decades have shown incredible market volatility, and a degree of economic instability that most people were unable to anticipate, except for a few select economists who were more attuned to the realities on the ground than others.
Given this dynamic, many insiders and commentators felt that the likelihood of people continuing to take a chance on the stock market would lessen significantly.
Thankfully, this has not been the case. In fact, for those who are fluid in the language of the market and stock trading, they’ve managed to find significant ways of building little nest eggs for themselves without a problem at all.
While stock trading still entails a sense of risk, it can be a smart way of accumulating wealth, if you keep things simple and start out small.
At the same time, the stock market feels like a completely inscrutable financial force for many, and the idea of investing may seem a bit difficult and scary.
Well, if you’re a beginner looking to get into trading but not sure how then this article is for you. The following is a brief primer on what you need to do, and how to get started.
Overcome the Fear Factor
If, like many, you’re nervous about trading or are still smarting from the Great Recession of 2008, as well as the current economic downturn in the wake of the pandemic, then you’re not alone.
These major economic earthquakes shattered our belief that Wall Street was indestructible in our era, exacerbated by the fact that the Great Depression seems like a long-lost memory.
In any case, it is safe to say that you can and should overcome the problem, given that the markets have in fact revealed themselves to be fairly durable.
The catch is that you should not fall for any schemes that promise you exorbitant returns in a short period of time or anything else that may seem too good to be true.
Chances are, they’re probably not true at all. So, being modest and conservative in your expectations is one thing to keep in mind.
Also, do you have a retirement fund or a Roth IRA? Then you are already leaving some money to the stock market, if passively.
The only difference with trading stocks is that you will no longer be accumulating passive income, but rather, you will play a proactive role in how you choose to invest.
Before deciding to invest in the stock market, make sure that you have set aside a sizable emergency fund, one that will cover your expenses for a minimum of six months.
While investing in the stock market is a great idea, you don’t want to play with money that you may end up needing to help cover you on a rainy day.
A good rule of thumb for beginners is to only start investing once you’ve set aside an emergency fund.
Then, start trading stocks, but still, start with small amounts. For example, you can set aside five hundred dollars – or a thousand, if you can – to begin exploring different options.
Research the best stocks under $5, and plunk down your change in those first. It might also make you feel better to know that you’re beginning to trade stocks with the amount of money it normally costs you to pay for a slightly elevated coffee drink.
You won’t even know the money is gone, and you can keep your anxiety in check knowing that if you get dinged a little by the market one day, at least you are dealing with money that you can afford to lose.
Never invest more than you can conceivably afford – that’s one golden rule you should always remember.
Online Brokers Can Help
If the wealth of information out there still seems too intimidating to tackle, you can definitely secure the services of online brokers.
There are different kinds of brokers to choose from, but the main two kinds are full-service or discount brokers.
The former provides all the traditional services of a financial advisor, helping you to outline your retirement plan, healthcare, estate planning, and of course, investing in the stock market.
While full-service brokers typically work with wealthier clients since they charge high fees; if you have the means to do so, they can help you make sense of your assets and figure out different strategies around investing in stocks.
Discount brokers offer a lot in terms of giving you leeway in the sorts of transactions you are interested in, without being too handsy when it comes to advice.
They are usually AI bots run through sophisticated apps, which have advanced a great deal in the past few years.
If you feel that you have a handle on stock trading, and are willing to delve into the educational materials offered by these online brokers, then this could be a great solution for you.
The key to smart investing is to diversify your assets as much as possible so that you can lower your risk when it comes to trading.
Even if you’re starting small, try to have a diverse approach to the sorts of stocks you’re investing in, and when you feel comfortable, begin pooling together more money.
While it is absolutely fine to start with a small sum till you find your way around the stock market, the returns on your initial investment of five hundred or even a thousand dollars will be fairly minimal and will curtail your ability to diversify.
In this case, you will need to begin adding more money to your portfolio and invest higher amounts in the stock market.
Again, if you play the long game and give yourself the chance to learn more about trading first, this will eventually feel fairly intuitive to you, and you’ll find your way.
Just be prepared for the fact that investing more money down the line is what will help you see a much more gratifying nest egg grow over time.
As a new investor, you need to be aware of the different restrictions out there, and start small. Take the time to educate yourself on the market, and always ask for advice, whether or not you end up hiring a long-term broker to help you.
The process shouldn’t be too overwhelming after a while, and you will soon realize that it is possible to build a viable nest egg, regardless of how modest your means.