There are a lot of important things you need to know as a beginner investor. In this post we’re going to cover the basic steps of buying stocks for beginners as well as how to minimize your risk on trading your first few stocks in the market.
First Things First: Before You Get Started Buying Stocks
Before you jump in, you need to first have a good understanding of how the stock market works. We have a ton of information on our site that explains what you need to know before investing money in the stock market.
Before you buy your first stock, here is what you will want to do:
- Practice Paper Trading: Paper trading is a way to try out stock market trading without investing real money. You use fake money in a stock market game or app and you learn the basics. This is a great way to test out strategies and get a feel for what it’s like to trade stocks.
- Decide What Type of Strategy You Want to Try First: There are a lot of different basic stock market strategies. For example, are you going to day trade? Invest in penny stocks? Invest in a company long term? Learn the different strategies and the pros and cons of each on our Stock Market Strategies page.
- Research, Research, Research: You can’t research enough. The market is always changing, and you need to stay on top of the latest news in order to be able to make an informed decision to minimize your risk.
While you do these things to practice and to gain some experience and knowledge about the stock market, there are a few more things you’ll want to do before buying your first stock as a beginner:
- Save up Money to Invest: You need to always remember the #1 Rule of Trading which is this: Never invest money you can’t risk to lose. You need to be willing to lose any money you might invest, because it’s always a possibility. While that might sound scary, keep in mind any money you’re willing to lose is also money you’re willing to gain.
- Set Up an Account With an Online Broker: Depending on what broker you choose to use, you may have to wait to get funds transferred or account approval. See our list of Online Brokers for Beginners to hopefully save you a lot of hassles, headaches, and problems later down the road.
Once you’ve taken the necessary steps to learn as much as you can about stock investing, researched and analyzed the market, decided on a strategy and have money you can invest…you are ready to buy your first stock.
Here’s What You Need to Know About Buying Stocks:
Many things can influence the next few steps you take to buy your first stock: the strategy you choose, the online broker you work with, and the amount of money you are investing. In general though, these stock market tips are going to help you with buying your first stock as a beginner investor.
1. Start Small: It’s going to take you some time to get to know your software. No matter what online broker you use, it’s going to be a new interface to you and you will see all these links and buttons and it’s VERY easy to make mistakes just clicking around on the screen at first. So, don’t invest any large sums of money until you at least know how to do things in your software. Know your software and the online trading platform so you don’t make any mistakes that could cost you thousands simply due to user error.
2. Have a Plan: Watch the stock and be ready to react at any given moment to buy or sell depending on what the market does and how the stock performs. This will definitely depend on your trading strategy, but in general be ready to execute your plan.
3. Control the Emotions: You might see a stock plummet and sell out of panic. It’s scary. Keep calm, cool, and just remember your plan. This is why if you’re buying your very first stock – stick with small amounts. $500 is a good amount to start with just for experimenting with and getting to know your software and a feel for the market and understanding the ups and downs and the emotional rollercoaster that can happen when investing. Then, as you grow more confident in your knowledge and skills, you can start various other strategies.
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Have any questions about buying stocks for beginners? Feel free to ask me anything in the comments below!