Thousands of people lost millions of dollars in the Enron and Global Crossing stock fiascos back in the early 2000s. As an investor, you needn’t squander away your investments by making bad judgements or through trial-and-error. There are simply too many ways to learn about how the stock market works available to you online to read before you invest your hard-earned money!
Stock Market 101
Learning the basics to the stock market is right at your fingertips and boy, is there a wealth of information available to you. Here are some well respected and very informative sites that not only are user-friendly but gave invaluable comparisons if stockbrokers as well for you to check out at-a-glance.
The Motley Fool
• Free to join
• Has mobile site
• How to invest
• Retirement investing
• Buying your first stock
• Offers and specials from online stockbrokers
Investopedia
• Investing education
• Market analysis
• Advice for personal finances
• Stock market news
• CFA preparation exams
• Calculators and simulators
Yahoo Finance
• Free to sign up
• Free stock quotes
• Resources for your portfolio
• Symbol lookup
• Currency converters
Google Finance
• Free to join
• Features top market news
• What’s trending
• Sector summaries
These are not all that’s available on the Internet. There are literally thousands and thousands of sites like these that offer online training and tutorials to you. If you have some knowledge of how the stock market works already and have specific questions, you may want to call a brokerage firm and speak to someone directly.
What you need to know…
When self-educating yourself about the stock market, what you need to familiarize yourself with are things like acronyms and definitions to start off. Then you want to go to the basics such as:
A. What is a stock? A share?
B. What is a stockbroker and why do I need one?
C. How much should I invest?
D. What is investing?
E. What are the different types of investments?
F. What is a portfolio?
Just like any business investment or venture, the better informed you are the better decisions you will make concerning your investment.
Know thy self
Before making any investment, you need to take a look at your earnings, lifestyle and take into consideration things like your age or whether you need to live off your investment income or not. Investing is different for everyone depending on these and other factors. A 25-year old college graduate may invest differently than a 66-year-old retiree. Sit down and look at all the factors: income status, lifestyle, how much can you afford to invest? $100,000 or $100? Try out investment calculators or simulators to see different outcomes to your investment.
What kind of investing personality do you have? Can you stomach losses on your investment or will losses cause you to have a heart attack? Knowing your personality will help you decide on the amount to invest in the stock market. After learning the basics, you may even decide that now is not the right time for you to invest and may wait until a later date. Choosing a portfolio with balanced risks and rewards may not be easy at first, but with the right tools and the right stockbroker, is easily attainable.
Risk factors
Different risk factors can impact your investment. Failing industries can bring the stock market down quickly for months or even years. It’s important to educate yourself on all the risks involved that could directly or indirectly impact your investment. Many risks can be avoided by diversifying your portfolio or “not putting all your eggs in one basket” so to speak. Market risk is when you invest in a certain market, such as oil, and then oil prices go down. But there are other risks involved as well: credit, inflation, manager risk and several others. Be sure to familiarize yourself with each risk and ensure your portfolio is diverse enough to balance your risks.
Making an investment can be daunting, intimidating and quite simply frustrating, if you don’t know how the stock market works or how to invest. By doing your own research and educating yourself about the basics, you can position yourself to make wise investment decisions along with the help of your stockbroker. You can get access to the tools you need online, from the comfort of your home. Take it day by day and periodically refresh your memory about terms and risks.
Ask questions about your portfolio and diversify to keep your risk low. Review the stock market daily or weekly via the Internet or get text alerts with up-to-date stock information so that you can follow your investments. Make sure that now is the right time for you to invest. Take note of your spending habits, family composition and saving practices to determine how much you should comfortably invest. A young couple with a new baby may be willing to take on more risk than an elderly couple, so remember that what works for others may not be the right investment plan for you.
Take advantage of calculators and investment simulators to try different stocks and scenarios. There are even games that you can play online concerning the stock market where you can invest money and see the outcome. Use any and all of your resources. Why? Because this is your money and unless you’d rather go to the top of a building and dump it out to everyone below, you need to invest in your investment.
Learn about the different risks and what you can do to curb them. There’s no foolproof way to avoid all risks, but you can make it so that your entire portfolio is not just in one sector. Join online investment communities and see how other people similar to your situation and age group are investing their money. Be smart about your investment and it will work for you. Once you’ve done that, you are on the road to success.
Look at you! You’re an investment warrior!