The stock market is like a jungle. But it’s a jungle that’s not only alluring, but also a potential goldmine. Many people are interested in getting started with stocks but don’t know where to begin or what to invest in. Before you start throwing your dollars at publicly traded companies, start with an introductory course on stock investing. You can find plenty of classes on YouTube and educational platforms like Udemy.
Investing in the stock market can prove to be a strong long-term and lucrative strategy, even if it requires a bigger upfront investment. If you want to build your portfolio but are concerned about the initial investment, there are plenty of creative ways to fund it, including a personal loan for reverse mortgage loan.
For example, if you’re a retired senior that wants to get started in stocks to boost your retirement savings, you can leverage the equity in your home and get paid from lenders in the process (to see how you qualify, check out this calculator by All Reverse Mortgage). If you’re a young individual with strong credit, on the other hand, you can take out a personal loan to jumpstart your investment career. Either way, once you’ve secured the funds to get started, the key is to build a strong stock portfolio. Here are five ways you can achieve that:
Create an Emergency Fund
Before you dive into investing, you should have an emergency fund tucked away as insurance against your investments. Your everyday finances should be accounted for; this way, if anything goes wrong and your stock doesn’t do well, your basic financial needs are still taken care of and your livelihood isn’t at risk. Generally speaking, as an emergency fund, you should have three to six months worth of expenses stowed away.
Build a Diverse Portfolio
A portfolio refers to the entire collection of your financial investments. These investments could include stocks, commodities, bonds, and cash. As an investor, it’s crucial that you diversify your portfolio so that you aren’t putting all your eggs into one basket. Diversification can help you better manage your investment risks. To successfully achieve a diversified portfolio, look for asset classes (a group of investments with similar characteristics) that have negative or low correlations, so that if one stock goes down, another stock in your portfolio would balance it out.
Considering Working With a Stockbroker
A stockbroker is a professional who acts as a middleman between you and your stock market investments. You can benefit highly from using a stockbroker to trade on your behalf, especially as a beginner. The average person would go for a discount brokerage firm like TD Ameritrade or Fidelity. The stockbrokers at these institutions are well-versed on the markets and can offer some of the best advice on when is a great time to buy and sell.
In exchange for their expertise and for handling stock purchases for you, they’ll take a small percentage of the transaction fees. With the proliferation of online trading and platforms like Robinhood, human stockbrokers aren’t as common as they once were, however, there are many instances where having a real person advise you on an important purchase would be favorable over technology.
Invest in Real Companies
With a slew of stock symbols and tickers scrolling at the bottom of your television screen or top of your computer screen, it’s easy to get lost in the letters. But don’t forget that the stock market is much more than an abstract concept; once you invest in a piece of stock, you own a part of that company. As a part business owner, don’t just focus on the numbers. Dig and conduct thorough research. What’s the company culture like, how do they plan on growing in the future, who is the CEO and how are they perceived in the press? For example, let’s say you decide to invest in FedEx. If you research recent news on FedEx, you’d find that they recently acquired ShopRunner to expand their ecommerce capabilities. This would offer plenty of insight into the company’s trajectory.
Keep a Track Record of Decision-Making
As you start investing in different stocks, you might be tempted to quickly get rid of certain stocks during panicky times. This is why it’s so important for you to keep a detailed track record of all the decision-making processes behind your investments; to remind you of why you made the investments in the first place and to keep you in check. Every time you buy stock, write down why you’re purchasing the stock and the reasons why you would end up selling the stock. Each list should be highly detailed and written while you’re in a level, clear-headed space and the research on that particular company is still fresh on your mind.