Don’t jump in head first investing in stocks until you know the right steps to take so that you make the most of your money.
Are you intrigued by the stock market, yet scared at the same time? Maybe you want to find a way to invest your money and get a higher return than your savings account or the bond market offers. Fortunately, there are simple ways to start investing in stocks that don’t require excessive investments or have a large learning curve. With a few simple steps and the right brokerage, you too can become a stock investor. Check out the five ways to start trading stocks below.
Make Sure you are Ready
Just because you want to invest in stocks doesn’t mean you should right now. Ask yourself:
- Have you saved enough in an emergency fund? You should have at least 3 – 6 months’ of expenses saved
- Have you maxed out your 401K contributions or at least as much as your employer will match?
- Are you still carrying any credit card debt? If so, you should save some of your money to pay it off before investing too much.
- Do you need the money you’ll invest any time soon? Investing in stocks should be a long-term investment to allow for the ups and downs you will likely experience.
Get Familiar with the Stock Market
Understand how the stock market works or at least have a basic understanding. Also, get familiar with your favorite stocks. Don’t invest in a company only because you like its name or you love its products. Look at its history. How does it perform? Do you know how to trade stocks? You can get a basic education from your chosen broker, especially if you choose an online broker. You may even wish to try investing in a demo account where you get ‘virtual money’ and can ‘trade’ in the stock market.
Choose Your Broker
Online brokers offer low commissions, user-friendly platforms and access to educational material. While there are hundreds of options online, here are the top choices:
Fidelity offers zero-commission stock trades, plenty of research options, and a user-friendly platform. Fidelity doesn’t require a minimum account balance and they include stock research from 19 providers. You can trade stocks on the web-based or mobile platform, receiving real-time quotes and using their various strategy tools.
Ally Invest also offers zero-commission stock trades on its user-friendly platform. You can easily view stock charts, get a technical analysis, and buy/sell stocks with ease. Ally Invest does lack slightly in the research/education department, but they do offer access to your dashboard both on the web-based and mobile platforms, both of which work well. If you bank with Ally, it is convenient and easy to invest there too, managing all of your assets in one place.
Charles Schwab is one of the oldest full-service stockbrokers around today. Their online discount brokerage is just as high quality and functional. With $0 commission trades, plenty of research and tools, Charles Schwab makes it easy even for beginners to trade stocks. Schwab offers extensive research reports and tools, helping the investor that wants to know as much as possible about the stocks before investing. Schwab’s platform is available online and on the mobile app, but the online platform has more functionality, such as real-time quotes.
TD Ameritrade has been around since the 1970s and offers a top-notch trading platform both online and as a mobile app. TD Ameritrade offers a few platforms that investors can grow into as they learn the ropes and become more active traders. TD doesn’t have account minimums and they have commission-free stocks. With high-quality research options and stellar customer service, TD has a lot to offer.
The Vanguard Group
Vanguard offers low-cost commissions and plenty of options for stock trading. Although they don’t have an online platform, they do offer online trading but not with the traditional dashboard that any of the above brokerages offer. It’s a bit tougher for beginners to get started with Vanguard Group as it’s better suited for retirement investors looking for long-term investments.
Trading stocks 100% commission-free is Robinhood’s largest asset. This mobile app makes it easy for beginners to get started, however, it does lack in the research department. Robinhood doesn’t have an account minimum to get started and its platform is simple to use, especially for beginners. Its streamlined interface makes it easy to get comfortable trading stocks without getting overwhelmed.
Fund Your Account
Once you choose your brokerage, it’s time to fund your account to start investing in stocks. Link your checking or savings account to your brokerage and automatically transfer money over to start investing. Before you start investing your money, create a strategy. We recommend that you start slow, investing in a few stocks at a time. Get your feet wet, makes sure you are comfortable and then you can invest more money into stocks, eventually working your way into buying and selling as you get comfortable.
Have an Exit Plan
We all know the stock market sees ups and downs. Make sure you have a plan for those downs. Will you stick it out or bail out? Planning ahead of time helps you avoid making knee jerk decisions that you regret after the fact. Set your lowest price point and make sure you don’t react unless the stocks get to that point.
Trading stocks can be fun and overwhelming at the same time. Do your research and find the brokerage you are most comfortable using. Don’t focus solely on the fees. Look at the account minimums, brokerage offerings, and support that you receive too. Remember, you’ll likely invest in stocks for the long-term; choosing a brokerage that can support you along the way is important.