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People are becoming increasingly aware of stocks, mutual funds, real estate, debt securities, etc. Investment is an important decision in a person's life as an investment made at a young age can help you immensely when you retire from work. Investment in assets is another way of planning your retirement early.
If you have just started in the investment world, it is vital to understand the process first. Investing in stocks is not a complex task, but you will have to do some research before investing your hard-earned money. You have to follow a few steps before you start investing. These are:
Opening a brokerage account
Before you can begin investing in shares, opening a brokerage account with your bank is crucial. Opening an online brokerage account is as easy as setting up a bank account: You complete an account application, provide proof of identification and choose whether you want to fund the account by mailing a check or transferring funds electronically. The whole process will take about 15-20 minutes. After opening and funding your account, you can buy stocks through the broker’s website in a matter of minutes.
Research before buying the stocks
It is essential to research before you can buy a stock. You can begin this process by looking up the stocks of the companies that you know from a customer's point of view. The market analysis will give you many options, but you have to set a goal before investing.
Once the research is done and you've short-listed a few companies, the next step is to start digging into their annual report. This annual report helps you understand the company's financial and execution model in a better way, along with lot of other data. Keep the objective simple: You’re looking for companies that you can understand well and of which you want to become a part owner.
Decide the number of shares
Once you are done with the research process, you can start investing in those stocks. As a beginner, it is advised to start with small quantities to understand the market better. There is no pressure to buy from all the listed stocks; you can slowly add more stocks to your portfolio. Another option for beginners is to invest in fractional shares. This new offering by brokers allows you to buy a fraction of the share instead of buying the whole stake. It helps enter the league of more prominent companies like Google and Amazon, with higher value stocks.
Select the order type
There are several ways in which an investor can place an order for stock, but as a beginner, you should go for either market order or limit orders. Market order means that you'll be buying or selling a stock at the best possible market price. On the other hand, a limit order gives you the liberty to execute a trade at the desired price. For example, if a stock is priced at $10 and you wish to buy it at $9, once the share reaches the asking price, the trade is executed, and you get the shares.
Expand your stock portfolio
Once you are familiar with purchasing a stock, it is advised that you diversify amongst several different stocks in various sectors. You can also explore more investment options too. For example, you can expand your portfolio by investing in mutual funds and even consider some Options trading. The key to coming out ahead in the long term is to keep your perspective and focus on the things that you can control. Market gyrations aren’t among them. If you can ignore the volatility in the market and focus on the long term fundamentals, you are likely to do well.
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