If you're new to investing and interested in stock picking, then this guide is for you.
There's a lot of conflicting advice out there on how to invest in the stock market – lots of great resources and even more bad advice.
My Top 8 Stock Investing Tips For Beginners!
It can be overwhelming trying to pick up all these free tips and tricks for beginners!
So we put together a list of some tried-and-true methods that are very easy to understand and implement right now. Let's get started right away with our first tip:
1.) Get To Know The Basics!
Before you go looking at any "magic bullet" or "get rich quick" scheme, learn the basics about how it works first.
A lot of people jump straight into financial news without knowing how it affects you, or what to do with all of the information. Even more, people know they're not taking advantage of assets like 401ks and IRAs that can earn them money without doing much at all.
This is due to the way our brains are wired – we humans must learn by doing. We have a natural fear of missing out on something big, so we try to search for any shortcuts possible. But this isn't conducive to learning or building wealth.
Start reading the financial news each day after you've completed your research on companies… but never jump in front of it! Sit back and watch as things unfold over time, then go into action only when someone inevitably tells you there's an opportunity now.
You may find that this is quite easy and even enjoyable once you get into the groove of things. Make sure to check out our list of investment books in the "Investing Tools" section for anyone interested!
2.) Choose A Stock (Company) And Stick With It!
Chances are if you read financial news, you'll come across a lot of hype about various companies.
You may be tempted to put your money into every hot stock that's being talked about on CNBC or Facebook. But this isn't conducive to building wealth either, as it will spread you thin. Instead, choose one company (or maybe two at most) and stick with them for the long run.
Grinding it out day after day usually pays off when you find a winner – just look at Warren Buffet!
You can try the S&P Dividend Aristocrats if you're looking for a good place to start.
These are companies that have been paying out dividends for 25+ consecutive years, which is usually an indicator of quality management and future growth.
3.) Think Long Term
Despite what many people think, long-term thinking is one of the most important habits for beginners looking to join this market.
The reason why so many investors fail today is that they lack the patience and discipline to hold for the long term. Since stocks can produce high returns when held for a sustained amount of time, short-term thinking often leads to emotional decisions that could end up costing you money in the future.
Always try to remember that there is no such thing as "easy money" and good returns will come only after serious effort has been expended over an extended period of time.
After all, Warren Buffett bought his first stock in 1942 at the age of 11 and he is still holding onto Berkshire Hathaway's stock today!
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The motto of buy-and-hold is another one of the stock investing tips for beginners that should be followed.
While it's true that you can potentially generate strong returns by buying and selling stocks on a short-term basis, this approach is not recommended for anyone who is just starting out with their investments.
By following this strategy, you are more likely to prevent yourself from making serious mistakes that could have been prevented if you had remained patient in the first place.
For example, many beginners get caught up in an exciting rally or sell-off without stopping to think of what might happen next. Under normal circumstances, these types of events are usually followed by a period where stocks consolidate before moving higher at a later date.
As such, this means that even if you time the market correctly and get out before a correction or crash happens, there is no guarantee that your stock will be worth more when it comes back to where you originally bought it from.
4.) Never Overtrade
One very common mistake that many investors commit is by trading too frequently because they see a trend or a hot new investment idea., this behavior almost always ends up costing them money. Day Trading does have it's place, but I tend to recommend newbies avoid it for the time being.
Get the basics down first, the reason for that is simple: when you trade too much, you are more likely to make emotional decisions or act on incomplete information due to the heightened sense of risk that is associated with frequent trading.
In order to avoid being one of those investors who consistently trades his portfolio as a result of following the latest hot news, it is wise to find a research solution that provides accurate and unbiased data about investments before executing any trades.
In this regard, using a financial tool such as the CBOE S&P 500 Buy Write Index SM ETF (BXM) can be especially useful since it produces monthly income without having to sell securities from your portfolio.
Now, onto our next tip!
5.) Reinvest Your Dividends!
This may seem simple to some people, but many people make the mistake of spending all their dividends immediately after receiving them.
This is short-sighted and doesn't do anything good for you in the long run… only costs you money. You should set up an automatic plan to reinvest your dividends (or use Personal Capital's "Direct Indexing" feature) so that it happens automatically every quarter. This not only compounds your returns over time but also lets your money work harder for you.
6.) How To Build Wealth With Dividends
This may seem like a no-brainer, but if you want to start building wealth with dividends (and any other income sources), then it's time to stop living paycheck to paycheck and start putting money away for the future.
You should always strive to pay yourself first (which means no matter what happens, 10% of your income automatically gets put into savings).
7.) Consider Using Robo-Advisors
For many beginners who are not confident in their ability to make sound investment decisions on their own, Robo-advisors could be an excellent solution for gaining exposure to stocks as well as other assets such as bonds and cash equivalents.
By using automated algorithms to design their portfolios, robo-advisors ensure that all investments made meet certain requirements including targeted risk profiles and expected returns which can vary depending on each person's unique situation.
While you might miss out on some of the company interaction offered by working with a traditional financial advisor, Robo-advisors are easy to use and give novices an opportunity to establish their risk tolerance at the same time.
Another benefit for beginners is that robo-advisors can help them save money in ways that they would not have thought possible before. This could include switching to low-cost index funds which are often selected automatically by algorithms without requiring any input from the user.
Using this approach ensures that you have access to simple solutions when managing your investments so there is no need for following the latest stock investing tips every month or year if it does not suit your needs perfectly.
8.) There's No Such Thing As A "Lazy Portfolio"
I just wanted to add this section because I wanted to reiterate the point that you shouldn't rely too much on any one income source (even dividend stocks ).
Of course, you should put more of your money towards dividend stocks if possible since they offer free money in the form of dividends but never forget about other sources like real estate.
If you can use your real estate investments to produce enough cash flow to pay for your living expenses, then congratulations – you've effectively built a "lazy portfolio".
The best part is that you don't need $100k+ worth of rental property either … even getting started with just 1-2 properties is enough for most people. I'm not going to go into real estate investing here, but there are plenty of excellent books on the subject!
Alternatively, you could invest in dividend stocks or buy income property with other people (i.e. turnkey properties). The point is that it doesn't have to be just one thing and there's certainly no such thing as a "lazy portfolio".
As you can see, there are many ways beginners with little to no experience in the world of investing can benefit from using stock market index funds. While everyone has different goals and expectations, most will be able to choose the right type of investments for their situation so they can build up a strong 401K or IRA portfolio over time.
Over 59 Years Old?
If you're over 59 years of age, you may want to consider a Gold IRA from Goldco or similar companies.
They're an excellent choice for someone who has money to invest in gold,silver, and other precious metals and wants to avert what is now likely to become outrageously high taxation, which could result in inflation mixed with market volatility. They have a great reputation and with good reason.
By investing in Gold & precious metals with Goldco, you can legally avert a lot of the tax you'd otherwise have to pay.
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That being said, you should always be looking for ways to diversify your income sources and even increase them over time.
The earlier you start the better, but it's never too late to start investing or hustling.
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In the meantime, what other ways do YOU recommend saving money?
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