STOCK MARKET INVESTING TIPS FOR BEGINNERS
- Invest in Companies That You Understand
This might sound like common sense. But I’ve seen too many people invest in stocks (and therefore, in companies) purely based on advice from a friend, something they heard on the news or even a mere whim. All too often, I’ve heard the horror stories of stocks losing massive amounts of value in a short time, making shares virtually worthless.
To avoid that fate, I only recommend investing in companies that are easy to understand and that have a proven track record.
For example, let’s say you like Apple (AAPL) or Amazon (AMZN). Either would be a relatively straightforward investment. You are buying shares of a mature business whose services you probably use — and whose values are consistently increasing over time.
- Don’t Time The Market
According to the Oracle of Omaha, Warren Buffett, “trying to time the market” is the number one mistake that new investors make. That means don’t try to buy a stock when you think the price is low — it could dip even lower the very next day.
Instead, purchase a stock of a company that is likely to increase in value over time — regardless of what you might be hearing about the company in the news or from friends.
- Avoid Penny Stocks
If a deal seems too good to be true, it probably is.
Such is the case with pretty much all penny stocks, which is why I don’t recommend them. Generally speaking, companies that are available on penny stock exchanges are not as well-positioned for growth and, therefore, can’t provide competitive returns over time.
- Consider Buying Fractional Shares
The high prices of many blue-chip stocks are a common barrier to first-time investors. For example, if you only have a few hundred bucks saved, you can’t even buy one share of Google (GOOG), which is currently hovering around $1,500, or Amazon (AMZN), which is currently over $3,000!
If this sounds like your situation, where you don’t have a ton of money saved but would still like to get your hands on some prime blue-chip stocks, you’re in luck.
Companies Offering Fractional Shares:
- Robinhood
- Public
- Stash
- M1 Finance
- Betterment
For as little as $5 you can get a slice of a blue-chip stock. These fractional shares can be built up over time or sold like a normal stock.
Eventually, you might even be able to piece together several whole shares of stock by sticking to the course and buying fractional shares on a regular basis.
- Stay the Course
If you want to be successful in the stock market, you cannot respond emotionally to market shifts or trending news topics. Stock investing is a long game. The only way to really see a return is to experience compounded growth, which builds up over years, as you continue to invest your money in certain funds.
Even seasoned investors like myself fall for the same trap of selling stocks when worried that those funds might sharply decline — due to a pandemic, for example. Unfortunately, we find out the hard way a few months later that those stocks that were sold potentially at a loss are now worth even more.
Staying the course also means being disciplined with buying shares over time. Find an investment schedule that works for you — for example, buying new shares on a monthly or quarterly basis — and stick to it.
If you only buy a handful of shares once, your earning potential will be far lower than if you purchase hundreds or even thousands of shares of that same stock over several years.
PICKING THE BEST STARTING PORTFOLIO FOR YOU
When you buy a share of stock, you’re literally buying a piece of that company. If you’re still unsure of where to start, I recommend doing some soul searching and devising a game plan before jumping in.
Are there any companies on the above list with values, products, and services you agree with? What about other companies not on this list? Who do you think will be even bigger 30 years down the line when it’s time to cash in your retirement chips?
Once you identify a few companies that fit your criteria and risk tolerance, the next step is purchasing shares in your brokerage account.
By following the tips outlined above, and investing in any of the above stocks, chances are you will be happy you did. Here’s to finding the right stocks for you so your money can grow for you while you’re living your best life.
