Investors

A Comprehensive Guide To Investing In Stocks And Shares

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February 22
3:14 PM 2022

Growing your financial assets for the future is a must these days. One way to do that is to buy stocks and shares. By having stocks in your investment portfolio, you can beat the cost of inflation. If you keep your cash in the bank for years, you're less likely to double it. However, if you invest it in stocks, you're more likely to gain from the company's dividends or when you sell the shares.

But before you invest in anything, you also need to understand how it works. However, you should also understand that there are associated risks when investing in stocks. For instance, you could lose your capital when you don't apply the right strategy. Consequently, reading this article may guide you in every detail you need to know before diversifying your investment portfolio. 

1. Starting Capital To Enter The Stock Market 

These days, it's easier and more affordable to start buying stocks. You can find various platforms online that offer to buy and sell stocks without the hassle of hiring a personal broker. You can do so by registering on their platform, depositing some money in your account, and starting to buy stocks. 

What's even great about it is that you can do it for international investment. For instance, you live in America and want to buy Australian Securities Exchange (ASX) stocks. You don't need to call for a broker in Australia or go there to buy stocks from Australian companies. Instead, you can create an account on a platform that offers ASX stocks. But of course, you need to be updated on the Australian market when you visit moneymorning.com.au and other websites providing Aussie stocks updates.  

In addition, you can find many platforms that offer less than USD$1,000 to USD$100 when opening an account. That means you can start buying stocks even if you don't have a large amount of money. 

2. Understand Your Investing Approach

Another vital aspect of investing is to understand your approach. Whether you're a beginner or have been investing in stocks for quite some time, here are some ways to buy stocks: 

  • Robo-Advisors: One popular choice of investment approach is Robo-advisor. The Robo-advisor will consider your investing goals, risk tolerance, and age to make a sound investment decision. This brokerage will also make changes automatically over time and optimize your tax efficiency. Then, they're responsible for choosing the most suitable index funds to invest money in.

  • Index Funds: These are a type of exchange-traded fund (ETD) or mutual fund. It has a portfolio that can track or match the components of the Standard & Poor's 500 Index (S&P 500) and other financial market indexes. Regardless of the market's state, such funds follow their own benchmark index. As a result, you can have a low portfolio turnover, low operating expenses, and broad market exposure. 

  • Individual Stocks: You can also buy individual stocks as long as you regularly evaluate and research the company. This should be continuously monitored because companies can operate differently as time goes by. This is also the reason why you can be updated when their prices are likely to go down. But if you don't have much time to learn about the individual stocks you plan to buy, buying index funds may be a better option. 

3. Choose The Right Platform

As mentioned, you can start buying and selling stocks using an investment platform. These are like online shops where you can see the market, choose the stocks, and pay for them. What's great about most of these platforms is that they offer apps aside from their websites. 

However, you should be wary of the fees that each platform charges. Some may ask you to pay a management fee for using the platform. Others also charge some fees when you sell or buy stocks. 

And most importantly, you must also consider the platform's customer service. If you're a beginner, you're more likely to need some time to familiarize yourself with the platform. Having reliable customer service will help you throughout your investing career. 

4. Investing Early Is Recommended

One of the popular reasons many investors have stocks in their investment portfolio is the principle of compounding interest. This happens when your investment profits, and you use the latter to reinvest. When you do, your earnings could give you another set of earnings. 

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(Photo : AdobeStock)

Imagine how much your capital can gain if you start buying stocks early. This is because you stay invested in the stock market, and you're increasing your earnings through compounding interest. 

Conclusion

This is some of the basic knowledge that you should know when investing in stocks. Making this article as a guide will help you have a better foundation and understanding of what drives the stock market. Knowing how much you need to buy and how early you should invest is vital. Now that you're armed with all this information, you're now more confident about trying them now and seeing how far your investment will go.

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