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Victor Ovchinnikov
Victor Ovchinnikov

How To Buy Stocks And Make Money


What does that mean? In short, one common way to make money in stocks is by adopting a buy-and-hold strategy, where you hold stocks or other securities for a long time instead of engaging in frequent buying and selling (a.k.a. trading).




how to buy stocks and make money



While you can buy an array of individual stocks to emulate the diversification you find automatically in funds, it can take time, a fair amount of investing savvy and a sizable cash commitment to do that successfully. An individual share of a single stock, for instance, can cost hundreds of dollars.


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The stock market is an important part of our personal finance ecosystem and can be a great way to build wealth and secure your financial future, but buying stocks can seem daunting, especially for beginners. There is an overwhelming amount of information out there about what to buy, how to buy and the associated risks.


Buying stocks doesn't have to be so challenging. Doing your homework, choosing the purchasing method that makes sense for you and implementing a smart investing strategy you can stick with will help you build wealth in the long run.


If you have debt, consider paying it down before you invest money in the stock market, especially if you have high-interest or variable-rate debt like an outstanding credit card balance. For many people, it makes sense to pay down debt if the interest rate is 6% or higher, according to Fidelity Investments.


In short, don't invest money that you might need within the next few years. The good news is you don't need a lot of money to buy stocks: You can start investing in the stock market with less than $1,000.


If you don't want to pick individual stocks, it may be best for you to buy funds. In fact, financial advisors tend to like funds versus individual stocks because you're not putting all your eggs in one basket. One company might stumble while its competitor continues to grow, so if you own a fund that invests in both companies, your loss is mitigated because you benefit from the competitor's gains.


Fund companies like Fidelity Investments and BlackRock share information about their funds on their websites. You can read through why certain shares are included, the percentage of the fund they take up and performance. For example, here is Vanguard's page for its Vanguard Information Technology ETF. You can see that the fund "seeks to track the performance of a benchmark index that measures the investment return of stocks in the information technology sector." These types of fact sheets include share prices, past performance, all of the stocks included in the fund and more.


Another way to research individual stocks and funds is via research firms. Morningstar, for example, has a huge repository of data on different funds and stocks available, as well as ratings from Morningstar's analysts.


Before you can make a stock purchase, you have to determine how you'll actually buy these stocks. There's a lot to consider, including how hands-on you want to be, and how much you're willing to pay. With big investment companies like Vanguard, you can choose to open an individual retirement account (IRA) or an individual brokerage account that you fund with after-tax dollars.


A financial advisor is a professional money expert who can help you with retirement planning, paying down your debts, tax planning and more. They can also provide investment advice. There are several different kinds of financial advisors, including stockbrokers, who trade stocks on behalf of their clients, and certified financial planners, who are regulated by the CFP Board of Standards and help clients create long-term plans for managing their money. Some advisors are fiduciaries, which means they have to put clients' best financial interests ahead of their own financial gain.


Robo-advisors are automated investment advisors. If you use one of these programs, it will ask you for information about your financial situation, investment goals and risk tolerance, then use algorithms to create a portfolio with a diversified mix of stocks and bonds.


Trading apps that allow you to buy and sell stocks, bonds, funds and often cryptocurrency via your smart phone have become ubiquitous in recent years. Robinhood, Webull and E*TRADE are popular examples. To protect your investments, make sure you're using an app that is registered with regulatory agencies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) by visiting the SEC's Investment Adviser Public Disclosure or FINRA's BrokerCheck.


If you are working with a stockbroker or financial advisor who is managing your investments, they'll likely take care of buying stocks for you. Robo-advisors also do a lot of the hard work. Usually, they ask you to tell them how much you want to invest, your long-term investment goals, time horizon and risk tolerance. Once you deposit money, the robo-advisor automatically invests that money in the market, then manages your portfolio.


But if you're using an online broker or trading app, you'll have to place the orders yourself. These trading platforms tend to have step-by-step guides on how to actually place orders once you've deposited money into your account (which can take a few days if you're connecting a bank account). While some of these platforms offer more advanced moves, like options trading, experts recommend that you master buying and selling stocks before taking on more complex investments.


If you went the financial advisor or robo-advisor route, much of the work of maintaining your portfolio will likely be done for you. But if you used an online broker or trading app, you're going to need to regularly check in on your portfolio and make sure it's still meeting the goals you set when you first started buying stocks.


Diversification is a critical part of managing a portfolio. A diversified portfolio will have a mix of stocks, bonds and cash that aligns with your goals and risk tolerance. Within each of those asset classes, you should have diversification as well. The benchmark S&P 500 Index contains 11 industry sectors, and experts say it's a good idea to have stocks from a wide range of different industries in your portfolio. You should also have different company sizes and locations represented in your portfolio: large-cap, mid-cap and small-cap stocks, as well as both U.S. and international businesses. There are also different kinds of stocks to include, like growth stocks and value stocks.


If you invest solely in funds, some of this diversification will be done for you, but if you want to buy individual stocks, experts say having at least 20 in your portfolio is a good rule of thumb. A diversified portfolio ensures that even if one area of your portfolio tanks, you won't lose everything, since assets perform differently depending on market conditions.


Once you have a diversified portfolio, you have to maintain it to help make sure you'll see investment returns over the long-term. Financial advisors recommend regularly rebalancing your portfolio, which means buying or selling assets so your portfolio allocations are in line with your investment plan.


The exact stocks and funds that will fit into your portfolio is dependent on your own financial situation, including your goals and risk tolerance. But if you're curious about some cult stocks investors can't get enough of, check out our guides below.


Before you can start purchasing stocks, you need to select a brokerage account to do it through. You can choose to go with a trading platform offered by a traditional financial company like Fidelity, Schwab or Vanguard, or you can look at online brokers like Ally or Robinhood.


In order to continue growing your investments and to build real wealth, set up an automatic transfer to your brokerage account so you're regularly contributing over time. Remember that money you invest in individual stocks should be money you can afford to lose since there's always some risk.


Before buying stock in a company, understand what that company does, the product(s) it offers, its business model, how it makes money and its historical performance. You can also reference credible investing sites like Morningstar, a reputable resource for stock research and ratings.


A market order means you're buying the shares at the best available current market price when you place the order. Market orders are best when you're buying just a few shares or buying large, blue-chip stocks whose prices don't fluctuate drastically.


A limit order means you're buying the shares at your specified price or better, leaving you in more control of what you pay. With a limit order, the trade may not happen if the price doesn't get to where you want it. Limit orders are best if you're trading a large number of shares or for smaller stocks that have greater price volatility.


Money you invest in individual stocks should be money you are comfortable having tied up for at least the next five years. To maximize your returns, your best bet is to hold for the long term, especially during times of volatility.


As you can imagine, the limited supply and the excess demand drive up the price per slice. In economic terms, Dave let the market determine the price. The stock market works like this on a much larger scale with millions of stocks changing hands each day.


Mutual funds are created when a group of investors pools their money together and buys stocks from dozens of different companies, which gives you a healthy level of diversification for your investments.


One of the biggest myths about millionaires is that they take big risks with their money on things like get-rich-quick gimmicks and fad investments. But when we talked to over 10,000 millionaires for The National Study of Millionaires, do you know how many of them said that single stocks were one of their top-three wealth-contributing factors? Zero. Not a single one! 041b061a72


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