Investing Ideas For Beginners

If you have recently been hit by the stock market investing bug, but are not sure where to begin with then you have come to the right place. Most beginners assume that stock market investing is a money making machine and fall prey to the millions of ideas floating around that claim to make you millionaires overnight. Instead all you end up doing is making those guys selling you these ideas millionaires. I have always heard people say that there is no free money and that you have to work for it. Especially in the stock market you have to have money to make some. What I mean by that is that you cannot expect your $200 dollars to grow to $100,000 in a few months. However no amount is small enough to start with. There are various ways to convert that small amount to something big. So rule#1 is you that need to have fairly decent amount of money that you can put in your investment account over a period of time. No, your one time $200 dollars is not going to make you millionaire by the time you retire, however if you can put in $200 dollars frequently into your account then there is better chance of getting there. Next you need to open a trading account with an online brokerage firm. There are a lots of them available today that charge you from $4 to $12 dollar commission per trade. Choose the one that suits you best. Some of the costly one also come with some additional feature like trading software and analysis tools. But for Beginners, I would recommend going with the $4-$7 per trade ones, since we will be trading with small amounts to begin with. And we do not want to our gains to be offset by our commissions. Please be aware that some of these options only allow you to trade during a window of time frame during the day. For e.g. some firms will execute your trade only around 11 am everyday. So if you want to be able to trade anytime during the day then it might not be the best option for you. Sometimes there is a minimum amount that you need to put in your account to open one, however you can use that money to start trading ones your account is open. There are also some other options like DRIP that you can use to invest in stocks but that would be a topic of discussion for some other time. If you would rather have somebody else manage your money for you then there is always the option of putting your money in mutual funds. But where is the fun in that. Of course I would strongly suggest that you put all your 401K money in funds but you can always have some play money that you can use to trade stocks. So how much should this play money be. It should be the money that you are ready to loose, the money that will not affect your survival in any ways. So it should be the money that you have left after you have paid your rent, car/credit card payments etc. In short in the worst case scenario that you loose your money you should not have to be on the streets. Now that you are all set to start trading, comes the study part. Don't worry about it so much right now. For your first stock, you can begin with an ETF like "VTI" which is a basket of all the stocks traded in the US market. Its more like a mutual fund but unlike a mutual fund you can buy or sell it any time during the day. Why ETF? Because it would not be as volatile as a single stock and we do not want to see your stock dip 10% the next day you buy it. Once you get the hang of it then you can slowly start with single stocks. Even there I would say you start with a company that you know really well. It may be the company that you know from your work, or the place that you shop regularly. There are various strategies out there which allow you to select the right stock which we will cover in later sessions. Lastly the most important concept that you need to be aware of is "STOP-LOSS". It is the maximum amount that you are ready to loose on a particular stock. Don't get too attached to the stocks. Put in a stop loss of say 10% and anytime the stock goes below that sell it and move on to the next. Again there are various opinions on where to place the stop loss which we will cover in future articles.