Stock Investing for Beginners

With the fluctuations and volatility of the stock market, is now a safe time to trade? If you have never invested money in the stock market, how do you begin? Questions and worries surround investing in the stock market for beginners. In order to be successful and reach your financial goals, you need to have a sound investing philosophy and system. How do you get started?

The first thing that you must do if you plan to invest in the stock market is to assess your tolerance for risk. This may depend on many factors, such as your current family situation, your personality, and your proximity to retirement. Part of assessing your tolerance depends on when you need the money - or what your financial goal is. If it is a short-term goal, such as purchasing an expensive item in the next few months, the investments should be in safe, accessible accounts. If you are saving for retirement in two, three, or four decades, your money can be invested in high yield stocks because you do not need to worry as much about the day-to-day fluctuations in the market.

You also need to know how much fluctuation you can stand in the stock market. People with little or no tolerance for risk are unlikely to feel comfortable investing in anything. This overabundance of caution may protect money in the short-term but it does not allow it to grow. Investors with more non-investment income are more likely to take risks, as are people who hold more financial assets. If they feel secure that they can maintain their current standard of living in the short-term, they also feel comfortable with a higher level of risk.

Knowing your risk tolerance allows you to become aware of what type of investor you are going to be. For instance, those with a low risk tolerance will invest in lower-risk stocks. This is not the way to make the most money, but it is good for people who are approaching retirement or who will spend more than they earn in the near future. These conservative investors are likely to put the bulk of their money into bonds and equity income funds, which are low-risk. A much smaller percentage of money will be invested in higher risk stocks and growth funds. An aggressive investor will invest a small percentage in bonds and income equity funds and a larger portion to more risky, but more lucrative stocks and growth funds.

For those people who are hesitant to invest their money in the stock market, it is useful to remember that the risks involved are overwhelmingly in the short term. As the period of investment lengthens, the risks associated with the stock market diminish greatly. It may be riskier to do nothing with your money.

Here are some questions to ask yourself as you assess your personal risk tolerance:

* How long can you let the money grow? If you need money for the short-term, stocks with higher risks and higher rewards are better suited to your situation. If you can let the money grow for fifteen to twenty years, where will it be safest? The outcomes are different so your investment strategy will be different.

* What is your average household income? Is it likely to fluctuate greatly in the next few years? How many dependents do you have? This will determine how much you want to invest and how.

* Do you have a sufficient liquid emergency fund?

* How much fluctuation can you take? If the market drops 250 points, are you going to panic and want to withdraw all your funds? Are you willing to let it ride, knowing that fluctuations occur?

Since you are new to investing, it may be wise to adopt a low-risk plan to test your tolerance. Initially investing your money in mutual funds, bonds, and equity income funds will allow you to become familiar with the stock market. As you become more comfortable, and have that portion of investment in low risk funds, you can begin to invest money in higher risk stocks and growth funds. It is often nerve wracking to invest in the stock market for beginners; knowing your level of tolerance is a good first step.

To fully avail yourself of stock investing tips, you will need to enlist the help of a stock broker to help you with the stock trading system. You will need to choose carefully among the stock brokerage service options. At one point, in the not too distant past, there were only two kinds of brokers. Today, however, in our fast-paced and constantly changing world, more options are available to you.

Full service broker

A full service stock broker is the pinnacle of brokers - the one that offers the most services, but for a commission. This is by far the best place for beginners to start, especially if they feel unsure of what moves to make. Aside from performing all the transactions for you, full-service stock brokers are willing abd able to give you advice and insight. A good full service broker can be of invaluable benefit to your financial future. It may be one of the most expensive ways to go, but it is 100% worth it.

Discount/Online brokers

A discount or online broker has evolved because of the desires of the stock-buying public to want more than order-taking services from a brokerage firm. Many don't need the help of a full service broker and/or don't want to pay the price for one. A discount/online broker can offer you tidbits of advice and make helpful suggestions, but they don't go into the detail of a fully planned strategy that outlines the picture of your financial future. This type of broker is considered a middle ground between a full service broker and a deep discount broker.

Deep discount brokers

This type of broker most closely resembles the "order taker" of the past, but they offer better customer service in today's society where we are all looking for something a little different. These little added extras can make all the difference. Deep discount brokers are the most cost-effective broker choice - just don't expect an extra high level of support. Deep discount brokers offer the basics plus just a tad more as they have evolved into being more technologically friendly as well.

Money manager

A money manager handles sizeable accounts where large sums of money and stock transactions are involved. Before you seek this type of financial help, you need to have a considerable sum of money available to invest. A money manager will make your investment decisions for you and manage your entire portfolio. This is a more expensive way to go, but if you have the funds to spend and if you can enlist the aid of an experienced and knowledgeable money manager, it can all be very worthwhile.

Whichever type of broker you decide fits your needs, you need to make sure that he or she is covered by the Securities Investor Protection Corporation (SIPC). Every legitimate broker should have this coverage. It protects the holdings in your brokerage account up to $500,000 if the firm would fail or go bankrupt. This protection does not include, however, trading losses.

I call myself a "casual stock investor", and that's what is explained here.

I'm going be blunt: You need to save up a chunk of money to start investing.

Don't ever, ever, ever choose stocks over food, clothes or shelter.

That being said, I suggest you start with $1,000.

At this point some people may become discouraged because we're talking about real money here. Starting with less is an option, but it won't grow nearly as fast if you do, and some doors may close. But let's go over a lot of details right now to help you decide.

When I started, I put away a chunk of cash into a drawer each month, and then when I had enough saved up I bought my first stock with that.

$1,000 is a goal, not a hard-fast rule. Heck, some shares sell for less than five dollars each, and yes, it is possible to buy single shares. I would never recommend doing that, as the broker commissions would cost a bit more than that -- I'm just illustrating the situation for you.

You can start with half that much if you want to. But the more you start with, the bigger and quicker the return can be, and when starting to invest in stocks, I believe that seeing your money grow is the best motivator to continue.

Not only that, but some stock brokers have minimums to set up new accounts. $1,000 seems to be a common minimum, which is a second reason why I suggest that amount.

Some stock brokers might say their minimum is $10,000 or more. If you get one of these quotes then laugh at them, hang up and call a different company.

Please pardon my rant, but there is absolutely no good reason to require a starting payment of that absurdly high amount! It's a slap in the face to the middle-class and a big reason why most people are afraid to start, because they don't know that it can be done for less, WAY LESS.

Investing in the stock market can change your life for the better, so please don't let this speed bump stop you.

Here are some tips: Put all $1 bills and coins in a jar at the end of the day. As soon as you get your paycheck, take as much out of it in cash as you comfortably can and put it in that jar as well (some do $50, some do $100, some do $250). Don't buy coffee in the morning; make it at home and put it in a thermal mug. Then each morning put your $2 in the jar instead. Want to order pizza? Put that $20 in the jar and settle on making something.

Think of your future, not your immediate craving. THAT'S how you can easily fund this quickly if you need help and motivation to save.

I hope you're not thinking that it'll take a year to save up because you're only putting dollars and cents into the jar, it adds up really, really fast. And it can be fun because you have a new and very attainable goal you are successfully working on and will reach in a very short time. This is not head-in-the-clouds stuff.

Please, take this seriously. I could try to make everything sound rosy, but there is a very real cost to doing this, and I don't want to insult your intelligence by telling you anything differently.

However, towards the end of Step 2 below, I let you in on a major secret that could solve this for you.

Just so you know, once you have enough to open the account, you can then make much smaller stock investments. It's only this initial amount that's the challenge, the rest is cake.

Next you need to get a stock broker.

This easy.

There are companies you can use in nearly every city. It's as easy as walking into an H&R Block and getting a tax pro to help you. Instead you walk into a different door (or call a number) and get a stock pro to help you.

Here are some companies where you can get a personal full-service stock broker: Morgan Stanley, Wells Fargo, Merrill Lynch, UBS, Smith Barney, A.G. Edwards, Charles Schwab...

If you like, use one that you are familiar with and has an office near you. Or shop around for rates and see who you are most comfortable with. I'm purposefully not telling you who I use, because it's crucial you go through this yourself. Just get one.

If you don't have one of these company's offices locally, just search for them in Google. The important part is to have a personal representative you can talk to.

Specify that you want a "full-service stock broker".

They will most likely ask how much you will be investing and how often, be honest. I give you suggested guidelines here in this report.

Your broker does get paid based on how much stock you buy, and sometimes how much you earn.

It's worth it!

By paying them their commission, THEY do all the work for you, and you have a real live person to talk to and to hold us accountable (we're not worried :).

With the powerful combination of InvestorRules.com and a stock broker doing ALL the hard work for you, your risk is reduced to the absolute minimum and the potential for your money to make even more money is dramatically increased.

But what about using software?

With software, like eTrade and Scottrade (called "discount brokers"), you still pay setup fees, transaction fees, monthly fees, don't have a real person to help you reach educated decisions, you have to learn the software and do all the work yourself. The commercials make it sound great, but the reality is very different. You may graduate to this when you become way more experienced and potentially move to day trading, forex, or options, in which case it might be more cost effective - but for now it will likely hurt your progress and cost you too much.

Think of it like the difference between fixing a computer yourself, and calling a tech to do it for you.

Personally, I'm too busy. I'd rather pick up the phone and speak to a person I know and say "do this please" and have it be done. (Don't forget the "please" :)

Here's a major tip: do you have a 401k, and IRA, a mutual fund, a CD or a savings account?

If so, those financial institutions may also offer stock investment services. Call them and find out.

If they do, you may be able to get around their minimum starting amount for stock investing because you already have an account with them. And in that case, you can begin investing at whatever amount is comfortable for your budget. I still suggest starting with a larger chunk, however, but it's most important to get started.

When investing, try not to spend less than $500 per company. You want to buy a CHUNK of stock, not a piddly little thing.

But at the same time, don't put all your eggs in one basket.

Some people may say this is too little money, I call it 'getting started'!

All you have to do is call up your stock broker and tell them what you want to buy. When you fund the purchase, your stock broker will most likely receive their commission at that point, which makes the actual stock purchase a bit less. But remember, it's worth it. Plus, our stock brokers are working people just like us who deserve to get a paycheck for a job well done, just like we do.

When choosing stocks, pay no attention to the share price right now. Just because you can by 30 shares in one company as opposed to 5 shares in another for the same price doesn't mean anything right now. You can always be moe picky later on. **Just get started.**

Each month continue to save a chunk of money.

You want to keep saving money and buying stock in your 3 companies until you have bought $1,000 worth of stock for each company.

Yes, this can take a while. But you are doing it right and taking it slow. FAST action equals HIGHER risk. I don't do that, and I don't suggest you do either.

Repeat this process until you have stock in a few different companies, with $1,000 worth of bought stock in each.

Why? Diversify!

At some point you need to ask yourself how organized you can be. Can you handle keeping track of more stock, or do you want to keep buying more stock in the companies you currently invest in?

No choice is the wrong choice, as long as you buy stock in only a few companies at a time, invest a substantial chunk of money in each company (even if it takes a few months to save up), and you follow the advice of the you stock broker, and if you choose, the experts at http://www.StockInvestingProfits.com

At some point you may decide you are diversified enough. Just keep investing more money into the stocks you own. When you need to sell a stock, replace it with another.