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A beginner's Guide to Stocks and Stock Investing

 

You want to invest in the stock market, but do not know where to start? Then this article is just the ticket for you!

If you had invested $10,000 in the S&P 500 index 50 years ago, you would have about $1.2 million today. A successful investment in the stock market today, may bring you financial freedom years later.

It may sound nice, even easy when one puts it that way, but being a successful investor is not as easy as it looks. Before you dive deep into the financial markets, you need to know what to do, how and where to begin. Here's a step-by-step guide to investing in the stock market for beginners!

 

1. Choosing an Investor Profile

 

The first requirement to be a successful stock market investor is to know yourself well. The stocks you invest in, the amount of capital you put in, the risk you want to take, and many other factors are the factors that concern only you, and these factors are also crucial to get returns on your investments. To explore your investor profile, you can start by asking yourself the following questions.

 

Are you an analytical person? Are you good with numbers?

Technical Analysis

Hate math and numbers?

Technical Analysis

Are you a research person? Can you follow the current developments and do some homework?

Fundamental Analysis and News Feed Tracking

Don't you like doing research and racking your mind while following the news?

Fundamental Analysis and News Feed Tracking

Can you take the time to follow the stock market and the performance of stocks?

Active Investment, more time requirement

You don't have much time to spare for these tasks or you don't want to waste your time?

Passive Investment, less time requirement

Are you a patient person? Can you digest the psychological effects of volatility?

Long-term investment, few transactions

Do you panic when you lose money? Do you feel safe when you trade daily and close out your positions every other day?

Short-term investment, lots of day trading (day trading)

Can you transition from big gains to big losses?

High risk investment products

Do you intend to make safe, conservative investments?

Low risk and less volatile investment products

 

The good news is that regardless of which of the above options you accept, you are still on track to become a successful stock trader. The only thing that changes is "how" it will happen, namely the path you will take.

 

2. Different Ways of Investing in the Stock Exchange

 

Before investing in the stock market, you should decide what type of financial products you want to use. At this stage you will come across several options, and choosing the one that suits you best is important in terms of getting returns on your investment.

 

2.1. Single Stocks

 

Investing in a stock can yield high returns if it is backed up by serious research and thorough technical analysis. If you have the means and time to do this research, it may be wiser to invest your money in individual stocks.

Individual stocks are risky, but even in the short term they can have offer good returns for investors. On the other hand, if you do not like things like fundamental and technical analysis, company balance sheets and quarterly results, it is okay to take a more passive approach. If you decide to go that way, stock market indexes or model portfolios from brokerage houses can be good options. Active investors more often prefer individual stocks.

 

2.2. Stock Indices / Model Portfolios

 

Instead of investing in a stock, you can turn your attention to stock market indices or model portfolios. Especially for investors who have less experience in the financial markets, lack the time and means for research and analysis, and have a low-risk threshold, these tools can be invaluable.

Indices are generally known as long-term investment products. Looking at it in retrospect, one can see that this idea is not entirely wrong. Over a long period of several years, many stock market indices have brought profits that trounce losses caused by periods of volatility.

Passive investors prefer stock market indices more often.

We can position model portfolios somewhere between individual stocks and stock market indices. You can also invest in these portfolios comprising of more than one stock and selected by the analysts and experts of brokerage houses. This gives you the chance to make above-average-earnings with moderate risk.

 

3. Source of Investment in Stocks

 

At this point, let's talk about money that you should not invest in stocks. The stock market is not the place to tie up money you may need in the near future. Stocks that will most likely go up in the long run may cause you to lose money in the short term. It should be perfectly normal to experience a 20% loss in a one-year period (which is considered short-term for the stock market). For example, with the impact of the Covid epidemic, the decline in global markets initially reached 40%, but rose to all-time highs within a few months. The most basic lesson to be learned from this example is that one should never forget that investing in stocks is a process.

  • The money you set aside for your mortgage debt,
  • The money you are saving for your child's school fees,
  • The money you put aside for a summer vacation,
  • The money you borrowed from a friend for a short time,

are not good sources of funding to invest in the stock exchange. Investing with resources that you will not need for at least a few years and of which you can afford to lose some is the right approach.

 

4. Open an Investment Account

 

After getting past the basics and allaying your concerns, you can proceed to stage four of investing by opening an account with a reliable brokerage firm. Opening an investment account through stock brokerage firms is a simple process that usually takes a few minutes. However, which intermediary institution you prefer may involve a process that you may need to be careful about.

 

4.1. Choose a Licensed and Reliable Brokerage Firm

 

Choosing a reliable brokerage house is hugely important to maintain the safety of your investment and your personal peace of mind. People invest to protect and, if possible, grow their savings. Make sure that the brokerage house you open an account with is authorized by the regulatory authority in your country. We recommend that you do not work with small offshore brokerage firms, especially those that operate online. Such service providers may come to you with various promotions and offers that are too attractive to be true. However, when they take your money and disappear, that will be the true definition of being left high and dry.

 

4.2. Review Trading Platforms

 

Explore and experience the trading platforms of your chosen brokerage firm. Before you make a deposit, you can open a free demo account and perform real-time buying and selling transactions on the markets without any risk. After all, you will be using this trading platform while managing your investments and you want to do it in a convenient and comfortable way.

 

4.3. Mind the Commission Rates Charged by Brokers!

 

Before investing, carefully check the commission rates and transaction costs charged by the brokerage firm you choose. There are cases where some brokerage houses, which at first sight seem to offer very good conditions, receive high commission rates from investors, hidden in small footnotes and obscure clause in contracts. Therefore, check both the terms and conditions in your contract and the commission rates set for the shares you want to invest.

If you do not want to go through the kerfuffle of it all, you can open an account with GKFX and trade stock CFDs with a globally trusted broker.

 

5. Keep investing

 

“You do not need to do extraordinary things to get extraordinary results”.

A quote from Warren Buffet, who some say is the greatest long-term investor of all time! According to him, "the safest way to make money in the stock market is to buy shares of great companies at a reasonable price and hold on to them as long as these companies maintain their leading position. If you approach investing this way, you may experience some fluctuations along the way, but over time you will earn excellent returns."

It can be a wise choice to take what a professor like Warren Buffet says seriously and even use it as a guide for your investment decisions. Beyond that, life as an investor means living life in a certain way.

If you live like an investor, you can safeguard your income, approach your expenses with a cost-benefit analysis, and be more sensitive to developments in your environment and the world. As long as you maintain this level of knowledge and awareness, you will always have ample opportunity to self-improve.

Start investing today, keep investing and remain an investor.