What you should know if you decide to start trading stocks in order to be a successful trader? Let’s be honest, investing is one of the best ways to ensure long-term financial stability. Whether you’re investing in your education, your well being, your passions or your finances, anything you accomplish in life is a win.
Warren Buffet once stated that “the most important investment you can make is in yourself”, and he’s right. When investing in the stock market though, it can be a tricky business if you don’t know what you’re doing. Before you do anything regarding investing in stocks, it’s really important to read and learn as much as possible around the subject.
Luckily, this article is a good place to start!
Below we aim to introduce you to the amazing world of investing and give you important tips in order to help you get started.
Here we go!
1) You Don’t Need Big Bucks To Start
It’s a very common myth that in order to be involved in any kind of investment, you’ll need a big fat bank account to get you started. This is so not true.
If you want to open an account and start building a good trading portfolio, you don’t need millions. In fact, you can start with a few hundred dollars. Either way, no matter the amount of money you’re willing to invest, the way you invest it is more important.
In order to have money to invest, you firstly need to save it. Thanks to technology, there are many different apps that can help you save money over periods of time.
The online bank “Chime” for example, can automatically set aside 10% of every paycheck you deposit. Revolut also has a similar feature. Once you find the app that works best for you and have a few savings, you can enter the stock investing world.
2) Discover Your “Investor Type”
Now that you’ve managed to save enough money, you need to be careful how you invest it. There are many different types of investors so think about your options and which one you want to be more like.
For instance, many investors follow the “set it and forget it” method, where they basically buy stock from a company and then leave it there until it’s got enough value over time.
Others instead of waiting, choose to exchange-traded funds, index funds, and mutual funds or sell/buy other stocks.
3) Online Brokers And What They Do
Before you start investing through the help of online brokers, you should do some research around what they have to offer. The trading platform you will be using must be tailored to your investment goals, and where you are on the “investing map”.
Since you’re a beginner, it’s better to look at basic educational websites, trading-related dictionaries (you will be surprised how many “trading words” and terms there are), and most importantly practice before you start using your real money.
For instance, EverFX offers a number of video tutorials and educational articles which could work great for beginners as well as experienced traders.
Also, they offer a demo account where traders can practice before going into the real trading experience, and their team is available to assist you if you have any questions about trading and investing.
Brokers will usually either give you the tools to select and place your own transactions or offer a “set it and forget it” robo-advisory service as we mentioned earlier.
Additionally, if you’re a future stock investor, you should have in mind that a number of brokers may ask for certain fees, especially accounts that have the minimum deposit.
4) What You Need to Know About Commissions and Fees
Since we are on the subject of commissions and fees, many brokers have been advertising lower or nonexistent commissions on trades, and also ETFs that offer index investing.
However, let’s be honest, brokers also need to make money out of this service. Therefore, it is possible that your broker might charge a small commission whenever you trade a stock, either you’re buying or selling. There is a range of fees starting from $2 per trade but can be as high as $10 for some brokers. This also depends on how often you decide to trade because if fees start piling up they will eventually hurt your profits.
It is not advised to jump in and out of positions all the time, especially if you invest a smaller amount of money. If for instance, if you decide to buy 10 different stocks in a company at once, you will be charged separately for each individual trade.
5) Robo-Advisors And How They Can Help
Robo-advisors are fairly new to the trading game. This type of investment advisors flourished in 2008 by Jon Stein and Eli Broverman of Betterment. Their aim was to use technology in order to achieve lower costs for both investors and trading advisors. Since then, many other robo-advisors were founded by other companies and thus established online large-cap brokers like Charles Schwab.
Through robo-advisors, different algorithms will be created for the new investor, which will also include tax-loss harvesting and rebalancing.
According to the S&P 500 Index, new traders who choose to be assisted through robo-advisors might do better in achieving long-term wealth-building results. So, this could also be a choice for you if you’re new to the whole stock investing business.
6) How to Manage Risks When Investing
The one thing that’s certain when investing, is that risks will occur. The well-established investor, economist, and professor Benjamin Graham once stated: “Successful investing is about managing risk, not avoiding it.”
Therefore, according to the strategy you choose to follow will also determine if your investment’s future is long or short-term. A good way to manage risks when investing is to have a diversity of assets. This is mainly because if you have a “pot puree” of assets and stocks and one of them performs horribly, you will have other investments “keep you in the game”.
It’s hard however to have a rich portfolio of assets with a low deposit. So have in mind that you might need to invest in at least two companies, to begin with.
The Trading World Awaits
Take your time to experience different platforms with demo accounts, until you find the one that suits you best. If you are just entering the trading world, it would be a good idea to start on the low, with a small amount of money. You can then invest more, once you familiarize yourself with how this industry works.
Once you feel comfortable with the way things work, you can open a brokerage account with the company that seems the most trustworthy to you, and then start investing real money. Trading stocks comes with risks, and it is highly advised that “you do your own homework” before actually start investing! It will probably be a long trading journey, but I’m sure you will learn, grow and most possibly make money if you “play your cards” right!
Welcome to the trading world!