Investing is an incredibly daunting concept; people make millions of dollars on the stock market, but the stories about critical failure stick out far more often in our minds. While it’s true that you can make a fortune or lose it all on risky investing, the simple truth is that you can very reliably earn modest growth on your money if you start small and stay focused.
We’ve put together a very brief, very simple overview of online investing for beginners, one that you should be able to use to get started today. With a modest investment, a competent advisor and maybe a pinch of luck, you can find investments that provide stable growth far beyond that which a savings account or CD would provide.
Start an investment egg
Just as if you were going to open a savings account, you’ll want to start socking away some cash for your investment adventure. You don’t need a lot – $100 is a great place to start – but make sure it’s money that’s not needed elsewhere.
One thing that can help fund your investegg is to open a new checking account with a major bank like Chase and set up direct deposits. Almost all national banks have revolving offers to set up a checking account with recurring deposits. After a few, they’ll pay you anywhere from $100-$500 dollars, just like that. You can turn around and start investing with that money, no questions asked. Shop around for the best rate and make a switch and put the bank’s money to work for a change.
Practice, practice, practice
Most people went through economics in high school, and you may have had to run through the investment scenario, but if you didn’t, it goes like this:
– Pick a few stocks that look appealing, maybe some you think might break out soon
– Do some research on the companies and determine which you think has the best potential for growth
– Choose an imaginary amount of money, close to what you might invest, and then pretend you invested that much
– Go back weekly for a month and see how your stock is performing
– At the end of the month, tally up your loss versus your gains, and use that as a rubric for how to determine quality stocks.
There are also “games” on sites like Wall Street Survivor that do the same thing, only with additional information, quizzes and some direction. They’re absolutely worth tinkering around with.
Pick a brokerage firm that works for you
There are many brokerage firms online – Ameritrade and Edward Jones are two that are perfect for beginners. You’ll want one without fees and that has advice and tips for new investors, and don’t be afraid to sack one if it’s not working for you. Ask around forums, check out Reddit, and ask your friends who they use and why.
Keep up the momentum
If you start making money, don’t just take it and buy gummi bears. You need to reinvest to keep the ball going and make more money. One strategy is to always take half of what you earn and reinvest it, either in the same stock or diversifying to other companies. This way you can still earn some cash but you keep increasing the amount you’re saving. As long as your investments are stable, this should be self-sustaining, even if the growth is slow at times.
Trial and error
Investing is scary, there’s no other way to put it. The days of 3% savings accounts and 5% CDs are gone; you can’t just stick your money in a bank and hope for meaningful growth. Likewise, you can put cash into mutual funds but if you want substantial development on your investment, the stock market is the place to be. Don’t let it frighten you, though – you don’t need to be a cutthroat investment banker or wall street mad lad to jump into investing. You simply need to be willing to learn, study and grow your money consistently, and to roll with the punches if something minor sets you back.
Do you have any tips for first-time investors? We’d love to hear about them in the comments below!