Investing in the stock market is the most reliable way to create wealth over long time periods.
If you want to learn how to invest in stocks, start with a proven strategy for investing in the stock market for beginners. You'll find that long-term success starts with learning how to keep the odds in your favour and manage potential risk. The recent stock market volatility and quick shifts in market outlook offer clear examples of why that is crucial.
Understand that for both beginning investors and seasoned stock market pros, it's impossible to always buy and sell the best stocks at exactly the right time. But also understand that you don't have to be right every time to make money. You just need to learn some basic rules for how to identify the best stocks to watch, the ideal time to buy them, and when to sell stocks to lock in your profits or quickly cut any losses.
There are many ways for beginning investors to buy stocks, each with advantages and disadvantages. If you want low fees, you have to put in more time managing your investments. If you wish to outperform the market, you'll likely have to pay higher fees. If you want a lot of advice, you'll have to pay more as well. If you don't have much time or interest, you might have to settle for lower results.
Perhaps the most risk is from the emotional aspect of investing. Most stock buyers get greedy when the market is doing well, and this, unfortunately, makes them buy stocks when they are the most expensive. On the other hand, a poorly performing market triggers fear, which makes most investors sell when the prices are low.
Selecting which way to invest is a personal decision and depends on your comfort with risk, and your ability and willingness to spend time learning about the stock market.
With that in mind, there's quite a bit you should know before you dive in.
Here's a step-by-step guide to investing money in the stock market to help ensure you're doing it the right way.
1. Research And Decide On A Preferred Stockbroker
A stockbroker is an appointed agent who is authorized to execute, buy or sell instructions on an investor’s account.
In deciding a stockbroker important factors to consider include their ease of access, their affordability (since some firms place a minimum amount for opening an account), their integrity/reputation, and their status (active or inactive).
2. Register With Your Chosen Stockbroker
To register with a stockbroker, clients have to fill the registration form issued by the broker (either online or manually) and provide KYC (know your customer) documents namely;
• Means of identification
• Proof of residential address (bill or receipt no later than 3 months),
• Passport photograph and electronic signature (if filling the form online).
3. Fund Your Account And Start Trading
Stock investing is filled with intricate strategies and approaches, yet some of the most successful investors have done little more than stick with the basics.
Your stockbroker will provide you with their bank account details and they will fund your account as soon as any payment you make is confirmed. All transactions with the exchange are executed by your stockbroker. This can happen in one of two ways.
a. You can send trade instructions to your broker, usually by mail.
b. Some brokers provide online trading platforms that allow you to execute transactions yourself.
4. Compare Costs And Features
The majority of online stock brokers have eliminated trading commissions, so most (but not all) are on a level playing field as far as costs are concerned.
5. Decide How Much You Will Invest In Stocks
First, let's talk about the money you shouldn't invest in stocks. The stock market is no place for money that you might need within the next five years, at a minimum. While the stock market will almost certainly rise over the long run, there's simply too much uncertainty in stock prices in the short term.
6. Determine Your Investing Approach
You can invest in individual stocks if -- and only if -- you have the time and desire to thoroughly research and evaluate stocks on an ongoing basis. If this is the case, we 100% encourage you to do so -- it is entirely possible for a smart and patient investor to beat the market over time.
7. Continue Investing
Here's one of the biggest secrets of investing, courtesy of the Oracle of Omaha himself, Warren Buffett. You do not need to do extraordinary things to get extraordinary results. (Note: Warren Buffett is not only the most successful long-term investor of all time, but he is also one of the best sources of wisdom that you can apply to your investment strategy.)
The most surefire way to make money in the stock market is to buy shares of great businesses at reasonable prices and hold on to them for as long as they remain great businesses (or until you need the money). If you do this, you'll experience some volatility along the way, but over time you'll produce excellent investment returns.