The stock market can be a scary place and an even more intimidating process if you’ve never invested your money before. But investing online is one of the best pieces of financial advice you can ever receive. For one, it’s an excellent way to grow your wealth for a specific period then reap the fruits in the future, probably after retirement.
The best way to start investing in stocks is to put money in a trusted online investment account and use it to buy shares of stock. However, stocks are not like your typical savings accounts, certificates of deposit, or money market funds. They always have a very volatile principal value. They can rise and fall in very short periods. Therefore, if you still don’t have sufficient knowledge in investing, you can easily lose most, if not all, of your investment capital.
As a result, it’s crucial that you learn the basics of how to invest and the most effective strategies to use. That’s what we aim to help you achieve in this excerpt:
What Kind of Investor Are You?
Before committing your money, it’s vital that you know what kind of investments you want to venture into. Most investment accounts will also want to know which types of investments are best suited to you. Therefore, ensure that you have an investment goal already planned out and set how much risk you’ll be willing to take on in your investments.
Some investors are always more open to taking an active hand in the managerial part of their investments, while others prefer to set up their investments and forget them entirely until they mature. Both options allow you to invest in stocks, bonds, index funds, mutual funds, and exchange-traded funds (ETFs).
If you are the type of investor who prefers to be more hands-on and involved with your investments, this article should be particularly beneficial to you. But if you prefer to have someone else with expertise in the stock market manage the process for you, it’s best to look for a reputable Robo-advisor’s services at a minimal fee.
It’s vital that you know which type of investor you are to determine which investment types to focus on. Once you’ve found your preference, you should be ready to research stocks to trade.
Research Stocks to Trade
Once you’ve found a brokerage firm, you can buy stocks. But the question now arises on which stocks are best to buy. For beginners in the stock investment business, the best place to start investing in might not be stocks. Instead, start off with ETFs.
ETFs allow you to buy different bundles of stocks at once. This can help build more confidence, especially if you don’t know which individual companies to pick over the others.
ETFs built to replicate the bigger indices like Nasdaq, Dow, and S&P 500 are the best investment options to use to give your portfolio the boost it needs and broader exposure to the U.S. stock market. Most seasoned traders also advise that you diversify your holdings with other assets instead of just stocks. Diversifying your investments is one of the most effective ways of hedging the risks that arise from stock market downturns (but more on that later).
Where to Start Investing in Stocks
A thrifty, self-motivated investor who knows exactly what he/she wants might be served best using online brokerages, especially ones that provide commission-free trading. However, there are also stock options for new traders who feel more comfortable having the system or a broker pick the stocks for them. Such investors are better off using automated investing services, most of which are reasonably priced and provide a user-friendly platform to invest.
Human brokers and other financial advisors offer some of the highest investment service levels, which mainly revolves around investment advice. But this is also the most expensive option to consider.
Stock picking can be extraordinarily difficult, especially if you decide to go about it yourself. For the most part, there isn’t any way of knowing which direction the stock market will go. It’s on that note that even the seasoned stock investors, Warren Buffett included, discourage newbie investors from placing all their investments in individual stocks.
Best New Apps to Use for Online Investments
Stock investing apps have gained quite a reputation since the invention of the smartphone and the internet. Investment firms are now scrambling to develop mobile-friendlier apps that cater to the digital investor’s interests. The results have yielded some of the best stock trading apps the industry has to offer.
These apps have easy-to-use features that make them perfect for quick and painless stock investments, even for first-timers. And the only requirements you need is a smartphone and an internet connection.
As the resilience of Artificial Intelligence and intuitive software becomes more apparent in the stock trading industry, it’s also imperative that traders find the best apps with the latest tools for trading. These apps should have the latest tools and provide real-time research data and assess trading risks.
Some of the best online apps for the job include:
Robinhood is one of the most renowned online stock brokerage apps that provide online traders with a completely free way to invest. The app doesn’t charge any commissions on stock, it has no minimums, and has one of the best and easy-to-use application interfaces.
However, because Robinhood offers free investing, it doesn’t have as many perks as the other online investment apps. For instance, you won’t find features like trading tools, investing education, research, and several other investing options. But what it lacks in some areas, it makes up for in others, like providing high-tech, intuitively-designed, top-rated investing options on the market today.
The app also allows investors to trade cryptocurrencies like Bitcoin and Ethereum. But if you want to take your investing a notch higher, you can buy its premium version, Robinhood Gold, for $5 every month. The premium version gives users access to some of the apps premium features like allowing users to trade on margin, access market data, and make bigger instant deposits.
Acorns is the next best straightforward money-making online investment app you can find today. It’s also definitely one of the best online apps for beginners. Acorns helps users learn some of the must-have investment skills to improve your chances of winning big. This is the online application that will make investing fun and turn it into a daily habit.
To start investing with Acorns, you will need to link the application to your credit or debit card. Acorns will then round up all your purchases and move the change into your investment portfolio. This makes it one of the best apps to use, especially if you’re looking for a more hands-off investing type of approach but still want to make it your new habit.
Formerly known as Matador, Public also tops the list of the best stock investing apps you can find. It mixes social media with commission-free investing in creating a simple but unique platform that’s ideal for beginners.
Public’s iOS and Android apps also help users to connect with other investors. Its developers came up with an ingenious idea to connect users with about 5,000 different securities. Another sweet deal with using the app is that you get a free stock of up to $50 if you refer a friend who signs up and starts trading.
Public.com’s online trading app lowers the bar for beginners into the world of investing with no minimum balances needed and fractional shares available. After you’ve downloaded the app and opened an account, connect it to your bank account, and you should be set to start investing and trading.
On the downside, more advanced investors who want to invest in cryptocurrencies or international stocks may miss out when using Public.com. But overall, this is an amazing online trading app for beginners who want to learn most, if not all, of the basics of online investments in a fun and intuitive way.
Betterment is one of the world’s best Robo-advising platforms you can find today. The online investment guru manages and re-balances investors’ portfolios, making them stronger and more financially rewarding. Betterment is also one of the most user-friendly and easy-to-use online investment applications that can help users manage their taxable investments.
To start investing with Betterment, you will need to answer a few questions about your financial goals, age, income, and risk tolerance. This information helps the application to evaluate you as an investor and the best investment experience with your goals. Additionally, Betterment has built-in financial guidance that’ helpful for anyone who’s still new to investing.
It’s an excellent mobile application for both beginners and seasoned investors since it provides so much guidance to help all investors in different capacities.
Active traders who are looking for a mobile-first way to trade are better off trying Webull. This mobile app allows investors to trade ETFs, stock shares, and options to use. Webull also provides one of the simplest, bare-bone interfaces for smartphone apps. You won’t see several educational contents on the platform, but it’s still a leader when it comes to graphic analyses.
Webull is an excellent choice, especially for investors who have some idea of what they’re doing. It also offers commission and fee-free trades for stocks, ETFs, shares, and options, making it one of the most desired options with a $0 minimum balance.
Manage Your Stock Portfolio
While worrying over daily fluctuations won’t do your portfolio much health, there’ll be times when you will need to check in on your investments.
It’s always advisable that you revisit your portfolio several times a year to check if it’s still in line with your investment goals. Some few things to consider include:
• If you are approaching retirement, it may be best to transfer some of your stock investments to more conservative fixed-income investments.
• Pay attention to geographical diversification. It’s advisable to invest in international stocks as well to safeguard your portfolio. If possible, invest in stocks from different countries.
• If your portfolio is heavily weighted in one industry or sector, consider buying stocks in a different industry to build more diversification.
Limit Risks Through Diversification
Diversification is the most popular way of managing risk exposure in the investment industry. Prudent investors always invest in stocks from different companies in different sectors, sometimes in different countries. They do this with the expectation that if a single bad event affects one stock, it doesn’t affect the rest. Diversification allows investors to recover from losses incurred from some stocks, thereby allowing investors to stay afloat.
The first rule of trading is never to risk putting all your eggs in one basket. Also, never risk investing anything you’re not prepared to lose. This strategy is based more on the impact of margin trading. It means that you could potentially lose everything in a single trade if you’re not careful.
Long-Term Investors Vs Short-Term Investors
Knowing when to use short-term or long-term investments is a crucial part of growing wealth to help you reach your goals. Therefore, it’s essential that you learn all the strengths and weaknesses of short-term and long-term investments and which option is a better fit for your financial future. Here’s a quick brief on long-term investments and short-term investments.
When to Consider Long-Term Investments
Although some people put a lot of effort into short-term investments, getting to your goal of financial freedom isn’t a sprint, it’s a marathon. The earlier you start, the more you’ll be able to accumulate. The earlier you start, the more you can accumulate. And long-term investments help you to achieve this goal.
Long-term investments are mostly assets like stocks and real estate. They are the investments that you plan on keeping for a while. This allows them to grow and allow your portfolio to grow as well since you know you won’t access them for a significant period.
Times when it makes sense to consider long-term investments include:
• When your retirement is 20+ years away
• You want protection from inflation
• You need a plan for 7 to 10 years in the future
When to Consider Short-Term Investments
In contrast, short-term investments are the investments you intend to use to meet your financial goals within shorter time frames. Often, they include assets like cash, bonds, and annuities. Some few scenarios where trying short-term investments make sense include:
• You will need the money soon
• You want a regular source of income
The Bottom Line
The information provided in this excerpt should help you start investing and working like a professional. One important note to keep in mind when investing is to never invest in anything that you don’t understand. Above all else, remember that it’s your money on the line. So, don’t be afraid to ask as many questions as you have to.
The investment steps mentioned above should help you to stay empowered and confident, even as you start creating your retirement plan today.