In today’s world, you’re better off working smart instead of working hard. Being smart means letting money work for you. There are two well-known sources of passive income: real estate and money markets.
Unless you have a lot of capital at your disposal, investing in real estate is not the path for you right now. That leaves you with the money/stock markets. You can invest as little as $100 in the stock market.
How to Get Started with Stock Market Investing
- Choose your Path
The first step is deciding the type of investor you want to be. You can either manage the stocks yourself or hire someone to do that for you.
If you decide to go at it alone, you’ll have to read books and articles to familiarize yourself with the subject. You may also have to take free online courses on the same. Find a mentor to guide you as you do the investing.
If you hire someone, there are two options. You can either hire a professional investor or a robo-advisor. Most brokerage firms will give you both options. A robo-advisor is more affordable because they use artificial intelligence to study the market and make investment decisions. The human advisor will charge you more because you have to compensate them for the time and experience.
- Open an Investment Account
The second step is opening an account with the brokerage firm. Opening an account depends on your preference. If you plan on doing everything yourself, a brokerage account will do. However, if you choose a robo-advisor, you have to open the investment account through the advisor. Since the system will be making the investments on your behalf, you should give it unlimited access to your account and personal data.
Since brokers get their commission regardless of whether or not you make money, it’s hard to find a good one. To find a good broker, look at what the company is offering. The fees and commissions should be reasonable. The broker should also be able to provide you with additional tools and materials for research.
- Different Ways to Invest
The third step is knowing the difference between mutual funds and stocks. Stock mutual funds are also known as exchange-traded funds, and they allow you to purchase several stocks. One advantage of stock mutual funds is that they lessen your risk due to diversification.
For individual stocks, when the markets are unstable they will put you in a risky position. However, when the markets are in your favor, you will benefit greatly as the profits will be high.
The fourth step is setting aside a budget for the investment. You should find out how much money you need to start the investment. It’s important to note that the total will depend on the price of the shares.
That amount will also depend on the minimum deposit requirement by the broker. It is common practice for brokers to demand that you deposit a certain amount before you can start investing. Brokers understand the market and know that depositing less money only lowers the chances of making more. You can lose the entire amount in one day if the deposit is low.
The money that you set aside for this investment should be disposable income. That’s because stock market investing is not a get-rich-quick scheme. Your investments will slowly grow overtime. Therefore, don’t put all your savings into the stock market.
- Do it
The final step is investing. As you take the leap of faith, stick to the basic investment techniques. If you decide to select individual stocks, carefully pick a company that is likely to have long-term growth.
With the above steps, it will be easier for you to start your investment journey. Keep in mind that it can either be a short-term investment or a long-term one depending on your goals.