A 7-Step Guide to Jump-Start Your Investing Journey

Stocks can be an excellent way to build your wealth over your lifetime. To buy shares in a company hoping that the company will grow, perform well in the stock market as time goes on and gain on your investment.

Before you step into the puzzle, you might want to create some clear investment goals, figure out what you can afford to invest and at what risk you can stand. Wade through over 200 brokers then pick one that’s in line with the way you trade, fund your account, and buy stocks.

If you’re a beginner reading this, this beginner’s guide explains the important basics of how to invest in stocks, whether you have $1,000 to spend or something more modest, say $25 a week.

Starting to invest in stocks in 7 steps

Since investing in stocks means you are buying shares in a public company that you hope will do well in the stock market and that share price goes up, making your investment more valuable.

If you own a stock that appreciates in value over time, then investing in those stocks can bring positive financial returns. On the one hand it also means you could lose you money with a share price falling over time.

Step 1: Set Clear Investment Goals

Stocks can be an brilliant way to build your wealth over your lifetime. To buy shares in a company hoping that the company will grow, perform well in the stock market as time goes on and gain on your investment.

Before you step into the puzzle, you might want to create some clear investment goals, figure out what you can afford to invest and at what risk you can stand. Wade through over 200 brokers then pick one that’s in line with the way you trade, fund your account, and buy stocks.

If you’re a beginner reading this, this beginner’s guide explains the important basics of how to invest in stocks, whether you have $1,000 to spend or something more modest, say $25 a week.

Starting to invest in stocks in 7 steps

Since investing in stocks means you are buying shares in a public company that you hope will do well in the stock market and that share price goes up, making your investment more valuable.

If you own a stock that appreciates in value over time, then investing in those stocks can bring positive financial returns. On the one hand it also means you could lose you money with a share price falling over time.

Tips for Setting Investment Goals:

  1. Be specific about your objectives: Rather than being aspirational, such as saving for retirement, consider the meaningful, like saving $500,000 in my retirement account by 50 years old.
  2. Determine your investment horizon: Find out how much time you have to accomplish each one. Most commonly longer time horizons thus afford more aggressive investment strategies, while shorter time horizons call for more conservative play. The earlier you give yourself, the more conservative you’ll need to be in the beginning.
  3. Evaluate your finances: Factor in your savings, regular income as well as other current sources of financial resources before assuming how much you can put in direction of your investment goals.
  4. Rank your goals: Although most of us juggle many goals at a time, we have to put off saving for a home down payment, paying for a wedding next year, or saving for retirement because they aren’t urgent enough or important enough. For instance, such as a down payment for on dwelling is would take precedence over arranging a vacation.
  5. Adapt as life changes: Best understood as a verb, not a noun, the phrase financial planning. This a never ending process, which should grow with your needs and your aspirations. It could make you fall in love and out of it, have lots of children or not at all have children, or to discover that your life’s work entails moving cross country. Make a constant habit of reviewing and retuning your goals as your life changes.

The first step in any venture is the biggest, but by setting clear and precise investment goals, you’ll lay a strong foundation for building your investments. This clarity will help you navigate the stock market with confidence and purpose.

Step 2: Determine How Much You Can Afford To Invest

The key to knowing how much you can actually put in stocks (and how much you can invest in real estate) is to do some serious making sense of your finances. It’s a good step to make sure that if you are investing, you are doing it responsibly and you’re not risking your financial stability.

Tips for Determining Your Investment Amount:

  1. Review your income sources: First bring your sources of income into a list. See if your company offers tax or matching invested benefits options.
  2. Establish an emergency fund: Make sure you are financially grounded before investing. Solid does not mean perfect. The first line of the fund should be enough to pay for a few months worth of major expense bills like mortgage or rent, as well as other necessary bills.
  3. Pay off high-interest debts: For instance, financial planners suggest that one should disburse their money on high interest debt such as credit card balances. Investing in stocks won’t return enough to offset the high interest costs on these debts. So look at every one of your debts in the same way and balance the interest payments against possible investments. But your debts are likely to come first.
  4. Create a budget: After you have figured out your financial valuation, determine how much money you can put in stocks without putting your financial dreams at risk. You also want to know if you are putting smaller amounts in over time, or with a lump sum. Make sure that you’re using your budget to keep you from dipping into money you’ll need for expenses.

But don’t worry if your funds are not as high as you’d like them to be. With investing, you wouldn’t punish yourself for not being ready for a race on your first day of training. It’s a marathon, not a sprint and there is more road to travel.

Two crucial points:

  • Only invest money you can afford to lose.
  • Never put yourself in a financially helpless position for the sake of investing.

Taking these seriously is what separates investing from gambling.

Step 3: Determine Your Risk Tolerance and Investing Style

Understanding your risk tolerance is a cornerstone of investing. It helps you align your comfort level with the inherent uncertainties of the stock market and financial goals.

Tips for Assessing Your Risk Tolerance

  1. Self-assessment: Think about your tolerance level to the increases and decreases of the stock market that can be. Do you want to take on higher risk for the possibility of higher reward, or would you rather be safe and not out performing?
  2. Consider your time horizon: The length of your investment may determine your risk tolerance. With longer horizons you have more risk because you are willing to take losses during those horizons to make back the losses in the future. Investments are more conservative for shorter timelines.
  3. Gauge your financial cushion: Assess your money flow, the cash (savings), emergency fund and other investments. A strong financial cushion can insulate you from having to take too much risk on your portfolio at any given time.
  4. Align investments with risk levels: You will choose stocks and other investments to suit your risk tolerance. Examples:
  • Lower risk: Dividend stocks and bonds.
  • Moderate risk: That means index funds and exchange traded funds on midcap and large-capitalization stocks.
  • High risk: Growth stocks, small-cap stocks, sector specific investment.
  1. Adjust over time: The more your finances and goals change the more this could change. Reassess your risk tolerance regularly and adjust investment strategy.

The stock market proves to be better navigated with a certain level of comfort, which is why you can considerably enhance your chances of success with your investment if you accurately determine your risk tolerance.

Tips for Identifying Your Investing Style:

Regardless if your style is a more active or passive one, knowing your style for investing allows you to make decisions on what investment methods and tools to use. It’s everyone’s relationship with money. There are some who love to take an active hand and obsess over every last cell on their portfolio’s spreadsheets, and then there are those who don’t mind that set and forget approach. Then if they leave them alone, they know their investments will grow over time.

There’s a chance your style will develop, but you’ll have to begin somewhere, and however you pick isn’t obligatory.

Start from a self reflection — enjoy researching and analysing stocks or are you more detached. Here are your main choices:

DIY investing:

The second option is to follow that logic and if you know the ins and outs of the stock market and are bold enough to drop into the market without any direction and with minimal guidance then the stock market allows you to manage your trades yourself. Even DIY, there are more and less active approaches:

  • Active: You use your brokerage account to get your money/resources to purchases such as stocks, bonds and other assets, trade as you’d like. You will set your goals and decide at what point to buy, and at what point to sell.
  • Passive: Instead you purchase shares in index ETFs or mutual funds in your brokerage account. But you still decide which funds you buy money into and fund managers do the trading for you.

Professional guidance:

An experienced broker or financial advisor is sometimes invaluable for those who like a more personal approach, or want more. It works as financial professionals tailor their advice based on your life experience and goals, made you choose one out of a lot to invest, served as your portfolio’s eyes and ears to keep track of how it’s going and joined with you to change things here and there when circumstances obliged.

Step 4. Choose an Investment Account

You’ve figured out your goals, the risk you can tolerate, and how active an investor you want to be. Now, it’s time to choose the type of account you’ll use. Each has its own features, benefits, and drawbacks. In addition, the type of account you choose can greatly impact your tax situation, investment options, and overall strategy. You’ll need to compare different brokers to find the investment account right for you.

Tips for Choosing Your Investment Account

  1. Understand the different account types: In the table below, we’ve listed the differences between regular brokerage accounts, retirement accounts, and managed accounts. You’ll want to choose one that’ll work for you. We also list special accounts for education and health savings.
  2. Consider the tax implications:
  • Taxable accounts: These are the most common if you’re trading online. Brokerage accounts don’t offer tax benefits, but there are no restrictions on contributions or withdrawals.
  • Tax-deferred accounts: Contributions to traditional IRAs and 401(k)s cut taxable income, and taxes are deferred until you withdraw the money.
  • Tax-free accounts: Roth IRAs and Roth 401(k)s are funded with after-tax dollars, but qualified withdrawals in retirement are tax-free.
  1. Evaluate your investment goals: Match your investment account type with your goals. For long- If you are thinking of term retirement savings, think about tax advantaged accounts. If you only want to meet short term goals or are flexible with your investing, then a standard brokerage account could be better for you.
  2. Scrutinize account fees, commissions, and minimums:
  • Trading commissions: Said fees include what brokers charge you when you buy or sell securities. In fact, now many brokers offer comission free trades on certain investment, like stocks or ETFs.
  • Account maintenance fees: Annual or monthly maintenance fee may be charged by some brokerage accounts in relation to your account type and balance.
  • Inactivity fees: Fees can be charged by brokers if your account is inactive for a period as little or no trading activity.

Step 5: Fund Your Stock Account

At this step you chose a broker that fits your investment goals and preferences or favoured, or it’s the most convenient. There’s also been a decision as to whether you opened a cash account where you must pay for your investments in full, or a margin account, which allows you to borrow when buying stock.

Opening your account is once you found a brokerage and account type that fit your needs. This involves providing your personal information: Its Social Security number, address, employment details and financial details. And it shouldn’t take you more than 15 minutes.

Now you’ll have to fund it. Here are tips for doing so:

Funding Your Stock Account Tips

  1. Choose how you’ll fund it:

Bank transfer: And the most common means is the one that transfers the funds directly from your bank account to the bettor’s account. Paper transfers can be done as well by via electronic funds transfer or wire transfer.

Check deposit: Several of the brokers will accept a check so you can mail in that to fund your account. If you don’t want to do electronic transfers then this method can be longer but is fine.

Transfer from another brokerage: You can transfer assets into your new account, if you already have a brokerage account. ACATS transfer is usually a simple process with a few days to complete.

  1. Set up automatic contributions: Dollar cost averaging is the act of investing a set amount of money at a regular time interval regardless of what the market does. By cutting out bad decisions based on short term market news, this reduces your risk. You get to decide how often and how much you want to contribute to your automatic contributions; most brokers make it easy to stay within your budget and stick to your investment goals.
  2. Start investing: Once you’ve verified the funds are in your account (don’t worry: the brokerage won’t let you trade otherwise), it’s time to start choosing the stocks that best fit your investment goals.

Step 6: Pick Your Stocks

Even experienced investors have a time picking the best stocks. For beginners, stability, good track record, and steady growth potential is what they should be looking for. Don’t let yourself get wooed into gambling on high risk stocks in the hopes of a fast buck. Most of long term investment is slow and steady, rather than fast and rash.

Here are the types of stocks more likely to be solid bets when starting off:

  • Blue chips: These are shares are of large, well established, well financially sound companies, and have shown a history of reliably performance. These include companies included in the Dow Jones Industrial Average or S&P 500. Typically, they are industry leaders and secure during markets volatility.
  • Dividend stocks: Beginners may opt for those companies which regularly pay dividends. One sec you have dividends also providing regular income, you can then reinvest that to continue buying more stock. For more see How to Buy Dividend Stocks.
  • Growth stocks: More riskier to invest in the stock, the greater the chances for outsized growth! If you’re a beginner, trying to find your first stock, aim for industries with a long run potential, like technology or healthcare.
  • Defensive stocks: These are in industries that normally do well even in a recession, in other words utilities, healthcare, and consumer goods. As you start, they will be a buffer against market volatility.
  • ETFs: These are traded like stocks, they trade in relation to markets indexes such as the S&P 500 and instantly diversify your portfolio with the risk associated with individual stock down. The more experience you have, the more you can look at funds dedicated to sectors you’re interested in, themes that help meet your investment goals, or funds investing its shares in stocks that encompass environmentally, socially and governance experiments.

Step 7. Learn, Monitor, Review

Successful investors discover tips and strategies each passing day. As the stock market changes, staying up to date, going back to Step 1, reviewing your goals, etc., will be key. Here are tips on learning about, monitoring, and reviewing your accounts with an eye toward your goals and risk tolerance.

Tips for Learning and Monitoring Your Stocks

  1. Read widely and regularly: Browse reputable financial news sites. Know what’s going on in the world economy, be able to read business news and understand industry trends, and do your homework before you buy any courses or apps promising you easy returns or tricks, whether or not the publisher will himself well from it. Investment strategies, stock market foundations and diversification are some of the books you need.
  2. Use stock simulators: It refers to these platforms, platforms that let you trade stocks without losing your money in practice! Applications of investment theories, testing of strategies without risk are now possible with them. There is absolutely no cost to use this totally free Investopedia’s simulator.
  3. Learn about diversification: With your beginning steps here you’ll want to further diversify your investments into different asset classes to reduce your risk and increase your potential returns. We can show you how to diversify your portfolio beyond stocks when you’re ready.

From now on, you must watch your stocks and other investments. Regular review paired with staying informed will help prepare you to adjust when needed to ensure you stay on track in reaching your financial goals.

The Bottom Line

Beginners can start investing in stocks with a relatively small amount of money. You’ll have to do your homework to determine your investment goals, risk tolerance, and the costs of investing in stocks and mutual funds. You’ll also need to research brokers and their fees to find the one that best fits your investment style and goals. Once you do, you’ll be well-positioned to take advantage of the potential stocks have to reward you financially in the coming years.