Get Started In the Market
Now that we’ve discussed what online trading is, how to define your investing goals, investment strategies to achieve your goals, and investing mistakes to avoid it is time to get started in the market.
So how should you start? You can start slowly with a moderate investment in a low risk investment like a certificate of deposit or a bond. This is a great way to start because it will give you time to learn more about investing. It will also allow you time to do research on a more aggressive type of investment while your money is making money for you.
$100 U.S Treasury Bonds
The first thing you should have in the investment money making money world is an interest bearing savings account. Without one of these you’re spinning your wheels. The great thing about an interest bearing savings account is that you can get one at just about every bank that I’ve seen. A good interest bearing savings account should pay you anywhere between 2 and 4 percent on the balance. This of course, is not a lot of money and it will not make you rich but with steady deposits and a no touch policy outside of a real emergency, your money will grow steadily.
Once you’ve established a safe hold for your money, one that is working for you, it is time to diversify into something a little more aggressive. Next you should invest into some money market funds. Money market accounts can be done through your financial institution and have a slightly higher payout than your savings account. These funds work much the same way as your savings account. Money market accounts are a short-term investment which means your money will be locked down for a mere 3, 5, or 7 years depending on what you bought into.
More investing ideas
You could also opt for a certificate of deposit instead of, or in addition to a money market account. Certificates of Deposits or (CD’s) are a safe and secure investment to make and can be opened for a small amount of money. The interest rates earned on these investments are usually higher than a money market account. The terms for a CD are the same as those for a money market fund. The way a CD works is quite simple, first you select the term of the investment. The most common ones are 3, 5, and 7 years. Over the course of the term, interest is paid to the principle until the CD reaches maturity. The CD can be bought at your financial institution just like the money market fund and the bank or credit union will insure them against loss which makes them a sure bet. When the CD reaches maturity you receive your initial investment plus the interest it has earned.
Choosing any one of these three will give you an investment that is guaranteed while you learn more about stock market trading. With either one you can invest as low as 25 dollars and as high as 5,000 dollars. I’m sure you can invest more or less but these numbers are typical of what I’ve seen. So what is a comfortable number of dollars for you to invest?
How Much Should I Invest?
How Much Should I Invest?
Like I have mentioned in this and the two previous articles, is to avoid investing all of your money into the market. By the time you feel it’s right to invest you should have a healthy chunk of money in your savings account. If you were to have say ten thousand in savings then you’d want to invest twenty five hundred to five thousand. Also by this time you should have some money tied up in money market funds, CD’s, mutual funds, maybe an IRA, and perhaps a bond or two, if this is the case you could comfortably invest twenty five hundred dollars into a well researched and safe stock. A safe stock would be one that has a proven track record, or an established stock.
Of course tapping into your savings would be bad if you were saving up for a vacation or something of that nature. The portion of your savings that you’ll be using should be set aside for investment purposes only. Once you have this you can use a quarter to half of it in the market. Again using savings is great but you also need to make sure you leave enough to cover unexpected expenses like a mechanical breakdown of your car or household appliances, maybe you need tires or the kids need school clothes. Always leave money behind that can be accessed in an emergency. You want to get your hair and nails done or you want a new boat is not an emergency. In the current economy you should avoid frivolous spending at all costs. Anyway, I digress.
Some great money sources to use as investing money is inheritance money. This type of money is a windfall that happens very rarely and is very sad when it does, but if you use this gift wisely in the stock market your deceased relative will have given you financial power even if the inheritance is small. If you receive something like this it is far better to honor your loved one by using the money wisely instead of squandering it on frivolous things. The reason this money is so great for investing is that it won’t affect your financial situation by putting it in the stock market.
Next you’re going to want to divide your monthly income into three categories. First the largest portion should be for your living expenses and debts, the second portion or ten percent should be placed in an interest bearing savings account, and finally the last portion or whatever you can afford after the two main categories should be used to reinvest or add to an existing stock, buy more shares of a stock, or buy new stocks periodically. When you buy new stocks or test new stocks you are dividing your funds among many different avenues of added income.
Financial planners are a great tool for a person to utilize when working towards a financial goal. The planners can help you decide whether you need to invest more or less and give you some tips on stocks and other investments.
In conclusion, remember that each stock has an initial investment requirement that must be met. If you’ve done the research like I suggested, you’ll already know what this amount is and be able to meet it with free and clear money before investing. Never use money you don’t have when investing in stocks, never bite off more than you can chew (keep money aside for emergencies), and absolutely never take out a loan in order to invest. That is stupid and if you do that you deserve to lose it all. If confused you always have the ability to seek out advice from professionals that know the market and have sound financial advice for you. And finally, separate your investments by type and amounts using diversification.
© 2011 by Wesley Cox. All rights reserved. Copying without permission is illegal and will be prosecuted.