You need to begin your beginner investing by performing an assessment of your personal finances. If you wish to invest in stocks, bonds, mutual funds or even real estate, you need capital to invest.
Construct a net worth statement which will list your assets (cash, private property, savings, etc) as well as your debts (loans, credit cards, mortgage, etc).
Look closely at your debt position and determine if you can afford to invest now. It is much better to pay off high interest debt (12% or higher) that it is to invest the same money and earn 10% per year.
If you need help with this net worth statement, simply go to Microsoft’s’ site and download a free evaluation copy of Money.
It explains step by step how to create this statement.
Now for the next step in Investing for Beginners…
This step requires you to determine the level of risk you want to take with your investments as well as the percentage of return (earnings or interest) you desire. This is critical to making smart decisions when you are investing as a beginner.
Are you a high or low risk beginner in investing?
Would you be satisfied with 8% per year or do you want 25% or more? No one else can make that decision but you. Higher risk involves equities (stocks), and if you want minimal risk, look at government backed Treasury Bills.
Any beginner in investing needs a regular savings and investment plan as the key to their success. Get in the habit of saving a certain percentage of every paycheck, and write out an investment check just like you would in paying a bill.
Consider this amount in your monthly budget as a beginner in investing. Speaking of budgets, Money will also let you create a budget that will show you how to plan your monthly investments and income.
Learn to live within your means. Some of the wealthiest men in the world learned this lesson early in life.
They are happy to drive a car that is ten years old and live in a house that is modest, yet fully paid for. They live well below their means and would readily admit it was one of the keys to acquiring wealth and being able to enjoy other things in life (travel, giving to others, etc.)
How Does the Stock Market Work?
If you have never invested before, your biggest concern is learning how to invest.
There are plenty of ways to invest in the stock market and plenty of ways to lose money as a result. The biggest mistake that investors make is to trade an investment product without knowing the risks involved, and without considering what their own risk tolerance is.
If you are an experienced investor, you may want to consider increasing your risk exposure by looking at trading futures, or trading options. It is important to remember that although there is plenty of money to be made, you can also lose a lot of money.
The smart investor will only expose a small percentage of his overall portfolio to such risks.
So before you jump into these investment products, you should first sit down with a financial planner. Too many people look at investing as their ticket out of financial challenges.
While an argument can be made for that, the truth of the matter is that people take more risk than they should, all in the hopes of making a quick buck.
A financial planner can help you ensure that your fiscal house is in order, talk to you about investment planning, investing in mutual funds, bonds, exchange traded funds and retirement planning tips.
While stock market investing can help you achieve these goals, you need to start from square one. Also don’t expect to get rich by starting out with mutual funds as you need to know how to pick the right mutual fund.
Basics of investing in stocks
How would you like to be the owner of a business, and never have to show up to work? Imagine no commuting, no rush hour traffic. All you need to do is sit back, and watch those dollars roll in.
Most people don’t look at owning stocks as owning a piece of a business, but in fact, you are a part owner and in many cases, you have a say. The best benefit of all, you can earn money, help make decisions that impact the business and never have to show up to work for a single day.
Investing in stocks is the cornerstone of any financial portfolio. Without investing in stocks, you wont be able to realize your retirement dreams (unless you actually work for a huge company as CEO and will be getting a package big enough for you not to have to worry about investing, in which case, you should be playing golf and not reading this).
The key to realizing your retirement dream is to know the road to financial freedom. It all starts with an understanding of stock market investing. Its not just knowing how to buy; that just scratches the surface. You’ll need to have a full appreciation of what goes on each and every day in the stock market.
If you look at the average daily trading volume over the last 25 years, you’ll notice that there has been a lot of growth. That growth has been fostered by the average guy or gal’s interest in stocks.
What was once a way for the rich to get richer, is now an opportunity for a smart average person to get a few up on the Jones’ and even join the ranks of the rich. Now thanks to discount brokerages and the internet, almost anyone can become a shareholder.
That has its good points, and its bad points.
While anyone can become a shareholder, most do not completely understand stocks. They usually buy something based on something they heard on the news or worse, from a friend. They don’t know what they own, but, it is the next big thing.
The once in a lifetime chance to get in before the ship leaves.
Folks, it is not 1999 anymore. The dot-com era is over. And thank goodness.
Sure, there are stocks out there that tend to be volatile and they have the potential to reward the shareholders accordingly; however, they are the exception.
The market averages about 12% per year. If you are a smart investor, you can earn more. If you are lucky, you can earn more. Once your streak runs out, you’ll be losing more than your shirt trying to get some of it back.
We’re here to help you become a smarter, more informed investor and trader. Yes, you can do both; you just need to know how and when. We’ll teach you that.
We’ll show you how to protect yourself, how to manage risk, things to look for before you buy, what to look for after you have bought, and when to consider getting out.
The stock market can make you richer beyond your wildest dreams, but, more often than not, to quote Kenneth L. Fisher, “The market is the Great Humiliator. It wants to humiliate everyone but has a strong preference for the biggest and most famous.”
For stock traders the goal is very simple. Avoid getting humiliated and make some money.