greenwaymoney

[greenwaymoney]

Stock marketing investing for beginners

Your first step into the realm of markets. 

You’ve seen all the hype around stocks, GameStop, Tesla, etc. You hear all this talk about call options and swing trading and complex analytical systems. There seems to be so much noise that it can turn you off from actually getting started in the first place.

Here’s the truth: investing does not need to be complicated. 

In fact, we can make it incredibly easy. This post is for those that have never invested in the stock market before. If you’ve already dabbled in the market or are a seasoned investor, stick around for a refresher.

There are a few things you should do before you invest your hard earned cash in the financial markets:

Determine your risk tolerance.

Decide how committed you are to research.

Going in without a plan pretty much ensures you won’t get what you want (how do you know what you want if you don’t decide that upfront?)

Risk Tolerance

You must decide if you want to be risk averse or risk tolerant. Averse means you want safer, more secure investments. Tolerant means you are willing to trade risk for a chance at greater reward. Remember, risk does not always equal reward. A lot of stock market research is focused on finding what are called “Asymmetric returns” where you can leverage your returns to far exceed your upfront risk. That is for another time.

If you are younger, you will probably be more risk tolerant. The older you are, the closer you get to “retirement”, the more you are likely to safeguard your investments. However, that is certainly not true in every situation. 

Commitment 

Do you want to be reading financial statements and browsing the news all day? Probably not. How committed you are to researching investments and stocks will determine how actively you manage your portfolio. Also remember, just because you spend hours on Discord looking at stock signals doesn’t necessarily mean you will outperform the market. Risk ≠ Reward (not always at least).

For the beginning investor I still recommend you do some basic research (like reading this post) but don’t worry about getting too deep into it. The important thing is to just start. That doesn’t mean you throw your money at random tickers though. Let’s get into how to actually invest in the stock market. 

How to get started

Disclaimer: this is not financial advice, this is just the opinion of a guy on the internet. Make sure to do your own research before making moves with your money. Cheers!

Once you’ve asked yourself some basic questions and conducted a little upfront research, you need to take these steps to start investing:

Open a brokerage account.

Contribute money you are willing to lose.

Plan your portfolio.

Make your investments.

Behold, the road to investing lies before you.

Step One: Open a brokerage account

A brokerage account is like a bank account for stocks (oversimplified). It gives you access to the securities (stock) market and allows you to make trades. You will hear about margin privileges, options trading, futures, and a lot of other terms. Don’t worry about those words too much right now; we’ll get to them. 

You can go with a simple, mobile-friendly brokerage like Webull, Robinhood, or Public. I’ve linked to Robinhood that will give us both a free stock when you download the app and make an initial deposit. 

You can also go with a more traditional company like Charles Schwab, TD Ameritrade, or Fidelity. It is really up to you.

Most of these brokerages offer commission-free trading which means you won’t be charged fees to place a trade. In addition, some offer fractional investing which means if a stock costs $100 you can buy 1/10th of the stock if you only have $10 in your account.

Ultimately, what brokerage you use doesn’t matter. It’s a matter of personal preference. Just make sure you like the user interface and that it isn’t too confusing. Wouldn’t want you to accidentally YOLO your entire portfolio into OTM call options, net yet at least :)

Step Two: Contribute money that you are willing to lose

Willing to lose? What do I mean by that? What I mean is that investing is least effective when it’s emotional. If your entire net worth is invested in the stock market, and the market takes a 10% dip, how is that going to affect your mental health?

Only contribute money that you aren’t going to need to pay for basic living expenses. Check out this article where we talk about how to reduce your spending so you can have more money for investing.

Step Three: Plan out your portfolio

You’ve opened an account and made your initial deposit. Now for the fun part, right? 

Here you need to decide what exactly to invest in. There are thousands of companies out there so how do you decide which ones to place your cash into? What I would do in this instance is invest in index funds which are like baskets of stocks. Index funds like Vanguard’s $VTI covers a large amount of stocks and will basically follow the movements of the broad market.

This is a more risk-averse strategy. The market usually returns around 10% annually and that’s probably what you’ll be looking at with index fund investing.

Starting with index funds is a great way to get yourself introduced into the stock market without exposing yourself to a ton of market volatility. 

Step Four: Make your initial investments

Now that you’ve decided upon your investment strategy. It is time to make those investments. The biggest thing here is to buy and hold. Don’t try to time the market, nobody can do that. 

Putting it together

Congratulations! You’ve successfully completed a major milestone in your financial freedom journey. Investing in the stock market for the first time is no easy task. I’m so proud of you.

Once you’ve gotten started in investing, you can begin to experiment with more sophisticated and complex trading strategies, but only if you want to. You definitely don’t need to do anything crazy in order to make good returns in the market. It all depends on your time horizon and investing goals. We’ll have more content coming out soon regarding investing so make sure to drop a comment and let us know what you think!