Steps to Investing in the Stock Market

By Larry Amon

  • Overview

    Many people know something about stocks and the stock market but don't know exactly how to go about investing in the market themselves. It may sound scary and complicated, but it's really rather simple and educating yourself is the key to investing smartly and removing the fear.
    • Step 1

      Educate yourself. Understand that investing in the stock market is safest and is usually most worth it if you invest in stocks for the long run. Stocks can be fairly liquid in terms of investments, but don't let that fool you; if you buy and then sell stocks quickly, you are likely to get burned. Even if a stock goes up, selling may not be a good idea because in the long run it will probably go up much more. If a stock goes down, it will also most likely come back up in the long run. There are no guarantees and some stocks will lose all or much of their value, but if you are divested, you will still most likely come out ahead overall in the long term. Also consider that buying and selling often incurs trading fees and stocks sold quickly are taxed at a higher rate on the gains. Research everything you can about the companies you're considering buying stocks in. Learn as much as you can about the stock market in general. You can go to investing sites like the Motley Fool (see Resources below) to find out lots of information. This may sound like a lot, but in the end it will help you make the right decisions.
    • Step 2

      Get the money you need to invest. Before you invest in stocks, make sure that you have emergency money available to you so that you won't be tempted to sell your stocks too soon if you need cash. While you can buy stocks one at a time, you may want to have enough money to make your initial investment larger so that you can save on stock transaction fees. The fees are per trade, not per the amount you buy.

    • Step 3

      Decide what you want to buy. Have an investing strategy, know what companies you want to invest in and plan to keep the stocks for a long time. Have a plan for when you want to buy more stocks and what kind of stocks you want to buy such as single stocks or mutual funds.
    • Step 4

      Consider the tax implications. Investing in some types of stocks such as through certain IRA accounts can give you tax breaks. Consult an accountant to find out how you can benefit now from investing in the market.
    • Step 5

      Get an account. You'll need to sign up for a trading account with a stock broker. This can be done with an online discount broker or in person with one of the major investment companies.
    • Step 6

      Purchase stocks. The heart of investing is the actual purchasing of your stocks. Once you have an account, you can go online or call your broker to buy stocks after you have deposited money into your account. Just select the stocks you want to buy and the quantity you wish to buy. You'll need to get a recent quote of the stock price to find out how much of your money will be invested. You will also be charged a fee for the transaction.
    • Step 7

      Know when to sell. In general, avoid selling until the time at which you have planned to sell to get money back out of your account and recoup from your investment. Do follow some stock market and company news to see if you might want to consider selling a company early. If you know that a company whose stock you purchased may be going out of business, than you may want to sell sooner rather than later.
    • Skill: Moderately Easy
    • Tip: Consult a financial adviser.
    • Warning:
    • Don't day-trade.

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