Beginning your investment journey is both an exciting and daunting time. As a first-timer starting out, there is a lot to take in and weigh up. Getting help understanding investment processes and terminology can help you avoid losing capital and feel confident about investing in shares.
How investing in shares works
When you invest in shares you buy part of a company. Shareholders can hold onto their stocks and sell at a future time when stocks are in high demand. As well as capital gains from sales, shareholders can also earn dividends from profits.
Getting started in investing
Investing is the perfect way to increase your wealth in the right situation. It’s important to examine your personal wealth and goals to see if you are ready to get started.
Make sure you’re financially ready
Before you put your money into shares, pay down any high-interest debt you have and make sure you have cash in savings to cover any emergencies.
Understand your investment goals
Rather than just “making money” you need to have a goal in mind for your investment returns. This will help you decide what type of investment is best for risk and maturing times.
Choose an investment strategy
To make the most of your investment you need to have a strategy that dictates how much and how frequently you add, buy or sell.
Determine how much money you need
You can start investing with as little as $1,000, but you’ll need a long-term goal where you continue to invest. As well as the profits gained over time you need to factor in broker fees and exchange rates for international trades.
Using a broker to buy and sell shares
The most common way to buy and sell shares is to engage an online broking service or a full-service broker.
Online broking services
Online accounts allow you to buy and sell shares with dashboards and bots to help out. Fees are lower but you will be doing most of the work.
Full service brokers
A broker advises on the best investment moves to make and handles the trading for you.
There are fees and charges that come with the service but for many people it’s worthwhile as buying directly is time-consuming.
Buying shares directly
To buy and sell shares directly you need to be a registered member of a stock exchange (stock broker). Brokers trade on your behalf and have investment experience and knowledge.
Indirect share investments
A low-risk, low-cost entry into investing is through indirect investments. Examples of these are hedge funds and mutual funds. Rather than own an asset outright you are part of a pool of investors that put in to cover a bundle of shares together.
Types of buy and sell orders
As well as different types of stocks there are also different types of buy and sell orders.
Starting out you will be dealing with market order – where you buy and sell instantly for the price shown (or close to). Limit orders are more advanced, where you state the price you want to pay for a stock in the future and buy at that price or lower.
Selling your shares
Most new investors are quick to buy but hesitate on selling shares. It’s important to respond to falling stock prices and sell before you take a big loss. The key is to be ready and committed to selling before you’ve even made the purchase.
Investing in shares is accessible to anyone. With the right budget and strategy, you can see real results on your wealth over time and continue to build a valuable portfolio.