People sometimes scratch their head about what it takes to get started in stock market investing. All those charts, numbers, options can be a bit intimidating.
So here’s a simple six step process to help you feel a little more at ease about the process.
- Read as much as you can
Thousands of books have been written on the topic with wide ranging views. Familiarising yourself with different perspectives will help you prepare and understand the big questions which are around trading.
Reading up on the topic also lets you draw up a smart and effective financial road map, so you can see which stock options are within your affordability range.
You will learn about the Bull Market, The Bear Market, spread betting, hedge funds, dividends and yields.
- Sit down with a financial advisor
Gaining input from people who have been operating in this sector for a while goes a long way to provide relevant, topical information.
Over time, advisors accumulate a vast level of knowledge, driven from an extensive analysis of the industries they focus most of their attention on.
Having worked with many people like you before, financial advisors can immediately start recommending the possible ways you can structure your portfolio, suggesting the risks and benefits you should be aware of, as well as a few insider tips.
- Choose the right software platform to trade on
Share trading means that big dollars are gained or lost in seconds. Regardless of whether you are just having a bit of fun playing with different shares or looking to build financial security, take a careful look at which systems best meet your needs
Do careful research about the software platform’s speed of processing, the commission you’ll get charged per transaction and so on. Make sure navigation around all the complicated charts is easy, while the charting systems are in depth, yet understandable. Stockbrokers.com prepared a list of platforms that go the extra mile to differentiate themselves.
- Diversify…FOR NOW
Investor Peter Peterson once said “the experience may have been costly, but it was also priceless.” It can be a tricky field to master, you do run the risk or losing money. But ultimately, you learn a lot as you go. And choosing a wide range of stocks helps you see the ups and downs of all choices.
Spread your portfolio as far and as wide as you can. Look at companies that are well established, companies that have just been listed. See how things go with stocks which have a good dividend return and those which are focused more on equity growth.
Over time you will be able to analyse, understand and gain a unique understanding in different markets and start moving more of your capital into specific industries. But for the time being, stick to a wide playing field.
- Study the company’s financial track record
A lot of us remember the fiasco which occurred during the Great Financial Crisis in 2008, when Bernie Madoff was found to be running a Ponzi scheme. A close analysis of his financials would have told any investor not to put their money near his business.
- Be prepared to take a few risks
We’re not talking about a stupid risk, like casino gambling where the odds of winning are so loaded, you’re almost guaranteed to lose. These “few risks” are measured ones, done after careful consideration of a company’s financial performance; from their balance sheet to statement of cash flows.
There are a lot of successful stock market investors out there who have made a fortune by investing in companies which are unknown or underrated at the time. Stransberry Research, in their article 3 secrets of billionaire investors said that Warren Buffet was investing in many companies such as The Washington Post when others were too scared to. One investor, who does not wish to be named invested in publicly listed mining companies long before there was an explosive demand for their minerals. The investor say work is now an option, not a choice.
To sum up …
While it would be great get started on buying Berkshire Hathaway Class A stocks which are trading at $213,000 each (at the time of writing), getting your hands on these are an earned privilege.
Getting started in the stock markets might seem complicated at first. With careful, planned moves, investing in the stock market can be a great way you can set yourself up financially for life.