Stock investing is a fairly simple task. Many people who just could not get started may just be because they do not have the motivation to do so. Take a look at these 7 simple steps to stock investing.
Stock investing is a fairly simple task. Many people who have not started investing will usually say that either they do not know how to or that stock investing is very hard to start off. I had personally been through that phase and understand fully what it takes to start off in the journey of stock investing.
After being on this journey for a few years now, looking back, I see that stock investing is actually a simple task. It just needs 7 easy steps to start investing.
Know What to Invest
There are many stocks available for investing but what should you invest in?
Understanding your investment objective is important. Are you investing for your retirement or do you just want to earn more money? What is your investment period?
Stocks can be broadly be classified into two kinds: Growth and Dividends.
Growth stocks are company stocks that tends to grow in capital value than yield in dividend payouts. Dividend stocks on the other hand has better yields than the growth in capital value.
If you are currently young and have a good number of years before retirement, you can consider owning a portfolio with more growth stocks. However, as the years goes by, do readjust your portfolio accordingly to increase more dividend stocks in your portfolio.
Finding the Right Broker
There are many brokers available and choosing the right one to put your money with can be confusing. If the wrong choice have been chosen, changing a brokerage firm can be tedious and might even be a fee to transfer your current holdings between brokerage firms.
So how to know which brokerage firm is the right one?
First and most importantly, having a regulated brokerage firm is an assurance that your money is safer with them as compared to an unregulated one.
Fees and commissions are paid to the brokerage firms for the services they provide to you and these fees and commissions can shrink your profits.
Regulated and fees are not just the two things to note when finding the right brokerage firm to trade with. Do take some time to compare between various brokerage firms before deciding who you would want to trade with.
Opening an Account
After you find the right brokerage firm, naturally the next step will be to open an account with them. This is the most “difficult” step of the 7 steps.
Before I opened my first investing account, I had already done my research, know what I want to invest in, derived a strategy, etc. But what I was missing out is the action of going down to the brokerage firm that I had chosen to open my account. There was so much resistance until a friend of mine had to drag me down and opened my first account!
Understanding the Business
Investing is like buying a business. A business man would have already done his homework to understand the business well before parting their money in buying the business.
Likewise, as an investor, we should understand what the business does, what is its prospect, etc, before clicking on the “buy” button.
This step should be done no matter how big, or small, the investment is.
Selecting the Company
After going through the business of several companies, selecting the company to invest in is the next step.
This is the time when you will have to weigh the pros and cons between buying two companies. Reminding yourself your investment goals will be important especially if you are choosing between companies from different industries.
Once you understand what each and every company business is about, it should be easier to decide which company to invest in. To make things easier, just do a comparison between two companies at a time. Have a checklist on what is important to you.
Buying the Stock
The easiest step in the whole. Select the stock to buy, enter the quantity and price to buy and click on the “buy” button.
Reinvesting the Dividends
In the event the stocks in your portfolio do pay dividends, it would be better to reinvest your dividends to purchase more shares.
The benefits of reinvesting your dividends can be found in one of the previous post here.
The Bottom Line
Stock investing is not a task which is not achievable. In fact, stock investing can be relatively simple. Just follow the 7 simple steps and you will be on your way to invest for a better future.
Are there any other steps to be included? Do let me know by commenting below.