If you’re a savvy investor, one of your goals should be to grow and protect the value of your nest egg. One great way to do this is by investing in stocks. But, before you go out and start buying stocks willy-nilly, there are some important factors and considerations to take into account.
This blog post will walk you through the process of buying stocks so that you can invest wisely and get the most out of your portfolio.
1. Understand what stocks are
A stock is a small piece of a company—similar to the way a house is a small piece of land. If you own part of that house, the land can’t be sold without your permission (though you will split the proceeds). A stock is similar. It’s a stake in a company that gives you some legal rights and ownership over it, though it doesn’t mean you have direct access to the cash in its bank accounts.
2. Open an account at a brokerage
Once you have an account, the next step is to decide who you want to work with. A number of factors come into play here: the kind of service they offer, how much it costs and what kinds of products they deal in. Some brokers are specifically geared toward providing a particular kind of service (for instance, fee-only financial planners who only help clients invest). In addition, some brokers have different minimums for opening an account or charge additional transaction fees based on volume.
3. Learn about different types of stocks
Stock markets around the world specialize in particular kinds of companies. There are tech stocks and biotech stocks, energy and energy-related stocks, international and foreign indexes, real estate and private equity. Only by knowing what each one is can you make intelligent decisions about which ones to buy.
4. Figure out your financial needs
The first step in making a good decision on what kind of brokerage to go with is knowing how much you need to invest. If you have a substantial amount to put in, you can decide whether it’s worth paying extra for premium services or direct access. If not, a no-frills broker may be the way to go.
Finally , keep in mind that the process of buying stocks is long-term. So, while it may be a good idea to use your broker’s advice on which stocks to buy or sell, it may also be worth doing some research of your own before pulling the trigger.