What’s the first thing that comes to mind when someone mentions the stock market? If this term brings The Wolf on Wall Street-type images to mind, you may be a bit off. Investing in stocks isn’t a luxury reserved for the mega rich. Now more than ever, there are numerous investment opportunities for those of us who are just starting off. Micro-investing platforms are available to help anyone get involved in the stock market.
What are stocks?
Stocks are securities that can be bought in order to own a piece or “share” of a company and its profits. Imagine that, by investing in stocks, you’re purchasing a “slice” of the company itself.
Tips for investing in stocks
As with any investment, you want to be sure that your return on investment in a stock will outpace the market’s inflation. Consider some of these tips for smart investors to make investing in stocks work for you.
Diversify your investments
Stocks can be riskier than some other securities because their value can fluctuate greatly. For this reason, stockholders can lose, or earn, a lot of money. If you invest in just one stock, it’s akin to placing all of your eggs into one very unstable basket. Because it is difficult to foresee the fluctuation of an individual stock, diversifying your investments is important.
Consider investing in exchange-traded funds or mutual funds. They contain a diversity of stocks and other securities. Portfolio diversification can help protect you from risk and improve your long-term returns.
Practice long-term thinking
Another key tip for investing in stocks revolves around long-term thinking. Long-term investing can have tax benefits, can be built up gradually over time, and is generally more stable and less volatile. While investors may experience short-term fluctuations, long-term investments usually yield gains because they tend to result in greater returns despite short-term volatility.
A long-term orientation to investing also lets you build on the power of compound interest and maximize your money through long-term growth. Keep in mind that a small investment now could make a significant impact on your future. After all, a $100 dollar investment in Amazon’s IPO 20 years ago is now worth well over $100,000 today.
Regardless of the type of securities in which you invest, make investing a priority. One way you can do this is by employing the Pay Yourself First (PYF) principle. This principle turns your investment goals from an end-of-the-month option into your top financial priority.
PYF means that you automatically allocate a part of your monthly income to a particular financial goal like investing before paying for other things, including essential bills and fun stuff.
Getting started investing in stocks
Depending on how much you set aside, there are a few different options to begin investing in stocks. For example, you can consider using an established financial institution to invest for you. Keep in mind that some of these financial institutions require a larger sum of money to get started.
Another excellent option is micro-investing through apps like FlexInvest. With affordable monthly plans tailored to your needs, you can begin making small investments. Over time, these investments (and your returns) can make a big impact on your financial future.
Investing in stocks doesn’t have to be complicated. Though it’s important to keep in mind that it won’t necessarily be as lucrative as it’s portrayed in popular media, especially for new investors. However, investing in stocks as part of your strategy could be an excellent way to keep yourself financially fit.