Shock of Picking a Stock
Investing for the first time is like learning a new language. There are new acronyms, symbols, and complex vocabulary that can leave you overwhelmed and frankly a little defeated. However, with a bit of guidance and some easy steps, you can be on your way to investing in stocks for the first time. Here's what you need to know:
1. Pick a Platform
When you invest in stocks for the first time, you don't just call up the stock market and say you want to start investing. Although, it's okay if that's how you thought it works! When you want to invest, there are many places you could potentially go to do so. You could call up a financial advisor, or you could do it yourself. If you do it yourself, you first need to pick a platform, or company, that will hold your account. Today, you can open up a brokerage account from the comfort of your own home with a computer instead of calling up a broker. Click here for a review of pros and cons of each platform.
2. Establish an Account
Once you have picked a platform that is user-friendly, the next stage is creating a brokerage account. You can easily set up an account in under 5 minutes and decide how you would like to fund the account. The easiest way to do this is to link your brokerage account to your bank account so that you can add money directly. You can add money to your account without it being invested in actual stock. It sits in a holding place called a "cash position" or money market fund until you decide your investments.
3. Choose an Investment
Stocks are a portion of a company, and when you buy a share, you become a part-owner in the company. Stocks are represented as a ticker-symbol that may have three to four letters. For example, if you want to buy a share of Google, instead of typing in Google you would search for GOOG to look up the stock price. Once you are on the company page look for things such as past performance, news regarding the company, and the company's annual report. That will give you a starting place for the overall health of the company. Search for companies that you understand and that you would like to own.
4. Share Amount
Next, decide on how many shares you would like to purchase. This can be a little confusing because you aren't selecting dollar amount like you would with a mutual fund. You need to look at the share price to determine how many shares you can afford in your price range. If you are looking to invest $500 and the share price is $32 you would want to buy 15 shares. Remember, stock price changes all the time so that dollar amount may increase or decrease depending on when you placed the order to buy.
5. Be Patient
As a new time investor, it can be incredibly frustrating when you start investing. Be patient with yourself and choose one stock to start with instead of overwhelming yourself with multiple stock positions. You have years to create a robust portfolio, but for now, you are learning the basics. Remember that you can gain or lose money at any time in the stock market. Be conservative in the amount that you invest to start and once you learn more you can add more to your portfolio.
Starting a portfolio can be intimidating, but it doesn't have to be. With anything, there will be a learning curve. Set your expectations to spend a few minutes each week with your portfolio learning about how your platform and investments work. If you need help further understanding, contact me.