How to Start Investing in the Stock Market

Tuesday, July 3, 2012

How to Start Investing in the Stock Market

Everyone has at least one friend who successfully invests in the stock market and as a result wants to start investing as well. It is important to understand the stock market and follow few simple steps before diving into it. The U.S stock market has an impressive portfolio and has earned major profits in the stock market as of late. Over thirty years of interest could mean a substantial gain for investors. The stock market can be both intimidating and inviting and without the right knowledge it could lead to a loss in your initial investment.

Many people are anxious to move from their regular certificates of deposit and savings accounts and start investing in the stock market. Education in the field of stock market will prove very beneficial in the long run. Investing money will eventually prove to be more beneficial than saving. However, stocks are not insured like bank deposits are. There is a higher risk of losing money. Taking time to understand and learning about the market will decrease the risk of losing and increase chances of gaining.

How to Start Investing

Firstly, you will need to open a cash account. This should be done using a brokerage firm. The account will enable investors to sell and buy stocks, bonds and other similar securities. In order to open a cash account with a firm you will need valid identification including a driver's license, military or state ID. A bank statement will also be required that shows your net worth and current income. 

Employers who work with the federal law or securities will also have to provide their permission. This is a requirement to ensure there is no insider trading or other stock market abuse. A cash account normally asks for a $1000 opening deposit. Shop around for cheaper initial deposits with other brokerage firms. If you are thinking about investments for retirement, an IRA should be considered.

Secondly, evaluate your personal situation, finances and investment possibilities. The less information and resources one has, the less likely they are advised to go ahead and invest in the stock market. Begin with a discretionary account which is an account in which a broker is given full responsibility. The broker chooses what to invest in. 

Read financial newsletters and publications to gain a better understanding of the stock market. There are many different and potential investment opportunities in the market. If you are interested in a particular industry, there are plenty of publications that are dedicated to those specific industries.

Then, research heavily on the company you wish to invest in. Ask yourself if it has experienced substantial growth over time or if it is a stable venture to dive into. Then select stock you are finally ready to invest in. This can be done by placing an order with a broker. They will then go ahead and have the stock purchased for you. This is not guaranteed as stocks are always fluctuating. Ensure to check with your broker regularly to keep an eye on your stocks.

About the Author: 

Lee is a freelance writer and content builder for Finance sites.  

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