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How to Invest in Stocks

Beginning investors will want to learn how to invest in stocks before sending money to a broker or putting it in an IRA. There are a number of ways how to invest in stocks. There are also a number of types of stocks to invest in. When learning how to invest in stocks the beginning investor will want to choose the easiest and most productive options first. For example, some companies match an employee’s IRA contributions. This gives the person an immediate 100% profit on their investment. Investing through an IRA or 401k or 403b plan will allow the person to see their earnings compound tax free over the years and only be taxed once upon withdrawal. How to invest in stocks initially may be best done through managed plans like a company 401k. The investor can watch how professionals manage a plan before starting to invest on their own.

How to invest outside of a managed plan or a mutual fund is to choose a stock broker and open a brokerage account. The investor will buy and/or sell stock through his account. If the individual has sufficient funds he can typically buy and sell stock online through the broker. Once the person has stock in any of a number of companies he can use his dividends to purchase fractional shares of stock instead of taking the dividend as cash. He will still pay taxes on the dividends but will not pay a brokerage fee for the fractional shares he purchases with his dividends. Some companies also allow shareholders to purchase shares directly from the company, again without a brokerage fee. If you are wondering what is a good investment then any time you can buy a good stock without paying commissions and fees that is a good investment.

For many the question of how to invest in stocks really means stocks, bonds, money market funds, real estate investment trusts (REITS), or mutual funds. All of these can be purchased through a broker with the exception of mutual funds where the individual typically deals directly with the mutual fund salesman. There are common stocks and preferred stocks. There are corporate, municipal, and savings bonds. There are US government treasury bills as well. Money market funds commonly pay a higher rate of interest than a bank account but do not have the upside potential of a well chosen stock. Real estate investment trusts are investments based upon real estate projects and do well when the real estate market is going up. Each of these investment options has its pros and cons. How to start investing in the stock market or other investments is to do your homework, start slow, and check your results.

How to invest in stocks successfully requires reading annual and quarterly reports filed by the company and with the Securities and Exchange Commission. The investor will want to learn how to read company financial statements in order to see how much money the company makes and how much its overhead is. Retained earnings are important and a company with financial reserves can typically pay dividends and have the wherewithal to withstand an economic down turn. How to invest in stocks includes reading current statements and reviewing old company reports to see if what the reports have been saying has the tendency to be true or is recurring hyperbole. Whether the investor buys dividend stocks or startups doing the routine fundamental analysis of reading balance sheets is a large part of how to invest in stocks successfully.

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