Investing in stocks is one of the best ways of building wealth. It has become accessible to new investors who can invest through brokers, mobile apps, or online. As with any other investment, investing in stocks can seem daunting. However, doing so is not as complicated as many people think, and we will break down the process to make it easier for you to get started.
Understand the Different Types of Stocks to Invest In
As an investor, you will run into different types of stocks you can invest in. While it may not seem like it, different types of stocks are not as complicated as they seem. The first type is common stock which is what many people think of when they think of stocks. It gives you an ownership stake in the business while allowing you to vote on some issues.
Blue chip stocks are offered by large, well-established, and financially sound businesses whose stocks trade on the public market. Because the companies behind them have a long history of stable and reliable growth, these stocks tend to operate profitably in both good and bad economies.
Preferred stocks do not give you voting rights like common stocks, but investing in them means you will receive dividends before those holding common stock. You can redeem them before or at maturity or convert them into common stock if you like.
Other types of stocks include:
- Large-cap stocks that belong to companies with a market capitalization of over $10 billion.
- Mid-cap stocks offered by companies with a capitalization of between $2 and $10 billion.
- Small-cap stocks for companies with a capitalization of less than $2 billion.
- Growth stocks belonging to high-growth companies.
Choose How You Want to Invest
There are several investment options to choose from, so it has become easier to find an option that works best for you. You can pick one that aligns best with your investing knowledge and how much energy and time you have. Some of the more common options include human financial advisors, robo-advisors (automated investment programs and bots) and self-managed investments where you do everything yourself. This last option is only recommended for those with a lot of investing knowledge and experience.
Decide How Much You Want to Invest
You should consider how much you want to invest today and how much you can invest in the future. It is best to start with whatever you have instead of waiting to get or save more money. Doing so allows you to gain investment knowledge while giving you the momentum to start a profitable investment journey.
Open an Investment Account
The type of investment account you open will depend on how you want to invest. If you want a professional to manage your investment, you can open an account with a financial advisor. They will help you design your stock portfolio and give you advice and guidance when you need them.
Robo investors are another great option, with their main advantage being that they are cheaper than humans. They will also help you create a portfolio and ensure that the stocks you invest in match your risk tolerance and investment horizon.
If you go with the self-managed option, you can open an account with an online broker. You will be responsible for creating your portfolio, but you will have access to many more investment options besides stocks.
Buy
Once you have all the above lined up, the next thing to do is to buy the stock. Remember that some charges might apply now or in the future depending on how you want to invest and the type of investment account.
The best thing about investing in stocks today is that there are many ways to do it. There is also a lot of information online that will help you get started while also helping ensure profitability. If you are still unsure about something, talk to a financial advisor so they can provide the advice and guidance you need.
