Stock Investing Basics

The first thing you need to know about stock market investing is that it is easy to do and that anyone can do it. The second thing to know is that there is no 'perfect' way to invest in the stock market. And there is no 'perfect' stock or investment product for you to choose.

The best investment choices are the one’s that you are comfortable with and the one’s that most closely meet your goals. With that said, you can always choose stocks better when you’re educated, so once you get started, keep practicing and you should keep getting better over time. As your investments grow, so will your knowledge of how to invest. Start simple and as you learn and save more money, expand and diversify the types of investments you have.

In its simplest form, here are the steps required to invest in the stock market:

* save money
* create a strategy
* open a stock account
* fund stock account
* select and purchase stock(s) or mutual fund(s)
* save more money
* invest in more stocks and funds
* keep educating yourself
* occasionally rebalance your portfolio



Save Money

This sounds pretty simple but is actually the single biggest deterrent to investing. It is important to know that you don't have to save a lot of money to begin investing. There are plans were you can start by investing as little as $50 per paycheck. However, most brokerages require a $500 or $1,000 initial deposit to open an account. If you can't come up with that much money right away, don't worry, start your own savings plan and tuck away as much money as you can in a bank savings account until you can fund your brokerage account. At $50-$100 per paycheck, you'll be up and running in just a few months. Having trouble saving money? You may want to visit this site and read hundreds of ways to save money.

Create a Strategy

Now it's time to create your investing strategy. Are you going to invest for growth, for speculation, for a down payment on a house, for retirement, or for college? Also, are you going to invest a set amount of money each month or are you going to try to 'time' the market? For a more detailed explanation of strategies, see our section on stock investment strategies.

Open a Stock Account

Now that you've saved money and have an idea of your strategy, it's time to open your stock account. If you are opening an account for speculation, you'll want to open a margin account with option trading enabled, if you are looking for a retirement account, you'll want to explore the tax benefits of opening an IRA or Roth IRA, and if you are saving for college, you'll want to explore the 529 and Coverdell IRA accounts. For a more detailed analysis on opening account, see our section on how and where to open a stock account.

Fund Your Stock Account

This part is really easy. Once your account is opened you need to send money to your account. A direct link between your checking / savings account and your brokerage is the fastest and most convenient way to fund your account. By doing this, you can automatically have funds transferred each paycheck or month, or you can manually move money whenever it is available.

Select and Purchase Stocks or Mutual Funds

This is probably the hardest part of investing because there are tens of thousands of different investments to choose from. Do you choose stocks, bonds or mutual funds? And then, which specific stocks or funds do you buy? The best way to choose stocks is to learn how to do your own research, which you can find in our section on stock investment research. We also have a section on analyzing mutual funds.

Save More Money

Until you retire, you should never stop saving money. Continue to save money with the goal of saving more and more each year. As you watch your prior investments grow, you should become more and more motivated to save even more money. The fastest way to do this is to increase your income and lower your expenses at the same time.

Invest in More Stocks and Funds

With the new money, invest in different stocks and funds to build a diversified portfolio. See our section on building your stock portfolio.

Keep Educating Yourself

Keep reading up on the stock market and finding new investments that are right for you. The more you read, learn and watch, the easier it will be for you to choose investments. See our section on recommended reading for stock investing.

Occasionally Rebalance Your Portfolio

Every year or so, take a look at your total portfolio and make sure that it is diversified, invested in quality investments, and that it is aimed toward your goals. See our section on building your stock portfolio.

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