For many decades, stock investing has served as a means for the wealthy to further accumulate riches. Because of the outwardly complex process of investing and the large fees involved, the activity repelled those who were living from paycheck to paycheck and those with minimal to no knowledge of what was actually going on with financial markets. Nowadays, however, investing in stocks is easier thanks to a myriad of technological advancements as well as a new generation of investors who are well-positioned and empowered with the knowledge and resources to actually learn and master the craft.
What Do You Need to Do?
It makes sense to know what the stock market is before going any further with your pursuit in investing. The stock market, in a nutshell, comprises of stocks of companies that are traded in an exchange. Players, both institutional and retail, attempt to make money off price fluctuations in the value of a particular company’s stock. If the company XYZ is expected to gain in value because of an impending acquisition deal with a much larger and more successful company, then buying shares in XYZ stock is supposedly strategic.
How to Get Started in Stocks
To start with stock investing, you need a brokerage account. There are different types of accounts, from individual investing accounts to Roth IRAs. The most common is an individual investing account and is used to participate in short-term price action with the use of volatile and higher-risk stocks. Roth IRA accounts should be limited to longer-term growth stocks that pose less risk as these accounts are expected to supplement the retirement lifestyle of the account holder.
Tools You’ll Need
Successful stock investing has to do with the right intersection of both psychological and technical factors. As an investor, you’ll need to train your mindset to manage positions effectively, particularly maximizing gains and minimizing losses. Investing is also about patience. Being able to sit on your hands when there is no actionable trade is equally as important as pulling the trigger when there is an actionable opportunity.
Technical factors at play include key macro and micro economic signals, such as company reports or the country’s GDP. The latter is less likely to affect short-term price action but is definitely worth oversight to give your trading plan the highest possible edge.
Once you’ve acquired a solid mental framework and technical prowess, it’s time to apply for a brokerage account. Make sure you understand the terms and conditions that come with a trading account to avoid hefty fees and penalties.
David Milberg is a financial expert in NYC.