Given the unpredictability of the market, it might be tempting to keep all your savings in a bank account. Especially millennials, who have shown more reluctance towards stock market investment than any other generation. However, by avoiding or being excessively cautious towards investment, you are missing out on benefitting from compound growth, allowing your financial fears to prevent potential gains.
Investing in stocks can be daunting and worrying if tackled wrong. It’s crucial to keep emotions out of the equation and maintain a long-term perspective. This way, your investment has the time to grow and recover from any market swings.
Whether you’re a cautious investor or looking for an investment guide, here’s how you can put money in stocks without feeling stressed.
LEARN THE BASICS
If you’re new to investing, take some time to learn before any purchase. Take a page out of Warren Buffett’s book, who never invests in something he doesn’t fully understand, a strategy that had served him tremendously. Understand what stock, bond, an ETF, index fund, asset allocation, and management expense ratio (MER) are. Read some books, join a local investment group, or search online investing forums such as Bogleheads or Reddit for more specialized information on investment practices and strategies.
MINIMIZE RISKS AND EXPENSES
Many experts recommend cutting investment costs to maximize returns. It’s a known fact that high MER’s and administration fees can significantly lower the profits from your 401ks. Buying index funds and exchange traded funds (ETFs) gives you more value. They come with fewer fees and protect you from being too exposed to a single company stock. Mutual funds, index funds, and ETFs let you distribute the risk over a range of companies.
JUST DO IT, AS NIKE SAYS
Daily stock predictions by market analysts can make you make emotional investment decisions resulting in poor returns. Instead of trying to guess the market, invest and stay invested. Most financial experts recommend diversification of your portfolio and considering your risk factor along with your distance from retirement. You could make it a habit to invest a fixed amount from each paycheck or your monthly business profits.
BE PREPARED TO BUY STOCKS
After having a balanced nest egg and a financial plan in place, decide a minimal percentage to invest directly into stocks. Keep an open mind and be prepared for losses- treat it as a fun activity without harming your overall investment goals. You can seek help from a financial advisor to determine how much you can risk in stock purchases.
CHOOSE THE RIGHT INVESTMENT PARTNER
Since cost plays a crucial role in your investment portfolio, choose a company that offers you the funds you desire with minimal fees. Vanguard and Fidelity offer a broad range of ETFs, index and mutual funds with low MERs. For your “play money”, select a brokerage company like E*Trade or Scottrade that provide easy access to individual stocks at an affordable trading price.
To purchase individual stocks in specific sectors and still manage your risks, consider Ally Invest. They don’t have an account minimum and each trade only costs $4.95.
