When you hear people talk about stocks, or investing, what comes to mind? Before I started my journey to financial freedom, I was totally oblivious to the magical world of investing. “Dow Jones” meant absolutely nothing, and this is true for a lot of people who do not invest. They simply don’t know about it.
(Pin for later…)
This is tragic, and needs to stop.
So I’m going to go through 5 simple steps on how to invest in the stock market. This is a guide for the beginners, who are interested in the subject of financial freedom, but do not know where to start. The answer that you seek is right here.
This post contains affiliate links. read our full disclosure here.
Beginners Guide to Investing in the Stock Market
1. Set a goal.
Identify what your intentions are, when starting an investment journey.
-Are you hoping to get rich quick?
– Are you looking for security in the distant future?
This goal will drive your style of investment and should stay at the forefront of any investment decision that you make.
Investing in the market without a clear vision could leave you lost in all of the options provided by wall street. Decide on a comfortable amount of money that you can live off of, and build your goals around that number. This will keep you focused, and not allow you to stray from your vision.
Have an emergency fund.
You do not want to have all of your eggs in one basket. That is why I believe that an emergency fund will give you the confidence needed to take that next step and start taking risks. My favorites are a money market account with PNC, as well as an online savings account with Ally.com.
My rule of thumb when I was a beginner was to have at least 6 months worth of living expenses saved before I started investing. This allowed for me to take a few losses that come with market volatility without panicking, and potentially losing everything.
Having an emergency fund will give you that safety net to fall back on while you watch your money grow. This way, should an unexpected medical event happen, or you need to make car repairs, you are covered on all sides financially.
If high risk is what you want to avoid, then refrain from putting your emergency fund into the stock market. That’s a no-no! This decreases the liquidity of your money, )depending on the account that you choose) and could come with monetary penalties!
Choose a Broker
The days of having to hire a personal broker are so 2000 and late (don’t judge my millennial humor). Now all you have to do to gain access to the market is sign up from your laptop!
Online brokerages are fantastic because they make it so that you aren’t paying crazy fees per trade, whereas with hiring a broker, it could cost up to 20 dollars per trade! Ouch! Another advantage is the freedom that comes with not having to use a human broker. You decide where your money goes on your own terms.
This is where a lot of people get stuck, so grab a pen and paper. There are so many brokerages to choose from now, that it’s easy to become overwhelmed. The key is to research what you are willing to put into your future.
My favorites when I had just started investing were Mint Brokers, and Ally invest because they have a low fee of 5 dollars per trade. There are simple ways around these fees that come with experience using these brokerages.
Simply look up these brokerages online (or any others that have peaked your interests), and sign up.
For many brokerages, there is a $2500 minimum for a managed account.
DO. NOT. LET. THIS. DETER. YOU.
You don’t have to get managed account. I don’t have one, and I’ve been doing this for upwards of two years!
You have the option of signing up with an individual account, that you would manage yourself (this simply means that you decide where to invest, and when to sell).
Fund your Account.
You cannot enjoy the market without having money in your account. Here is how to fund your account:
- Link a bank account to your brokerage account
- Provide your social security number
- Provide your address
- Provide your workplace/ salary.
This may differ between brokerages, but the general format is similar across the board.
Please don’t worry about the sensitivity of the information. This is the same process that you would go through when signing up for a bank account. The only difference is the potential rate of return on your investments. Now you can transfer however much money you want into your account!
Invest, Invest, Invest!
Investing does not end once you have funded your account. This is where the fun begins!
There is a whole library of companies that you can purchase, all you have to do is search for their ticker symbol:
Ticker symbol: a shortened (most times 1-5) letter symbol that is used to identify a certain stock.
For example: Southwest Airlines has the ticker symbol “LUV”, while Boeing has the symbol “BA”
A great way to learn all of the symbols for the companies that we know and love, is to use free online resources like dividend.com. You could also just google “(insert company name) ticker symbol” and it will pop right up.
Pick however many companies, and shares of said company that you can afford, and you’re officially along for the ride!
That is really all there is to investing. Not so bad right? Most of the work is upfront with setting up your account, and verifying your information, but once you have passed that mark you should be good to go. Repeat steps 4 and 5 with every company for which you chose to buy shares, and you will be well on your way to building an investment portfolio.
I really hope this beginners guide to the stock market served its purpose in getting you all past the initial intimidation of investing.
What are some steps that you have taken to start investing? What is your favorite broker? Be sure to share some input below.
Subscribe to my email list for more content like this, and a FREE budgeting PDF