When investing in the stock market, first things first – be prepared; you must be able to take the wins with the losses (don’t go into it half-heartedly). Next, you need to determine how much money you wish to invest. Many stock markets will have initial minimums that you have to match (or better) to buy in. Remember, minimums can be from around just under £700/$1,000 (may be higher for commissioned brokerages). Due to high minimums you may want to save up first – think in terms of 8 months, maybe a year of secured living expenses set aside – you don’t want to invest this money at risk of losing it. Then have a separate savings for the money you intend on investing.
A big step is deciding where to invest in the stock market – which one suits your lifestyle and needs best (how much are you prepared to lose, can you afford to lose, providing for the family and so on). It isn’t advisable to jump in the deep end – do your research; even if you have been investing for years, there is always something to learn and it is good to keep up to date. Be careful not to fall for sugar-coated stock market investments – if they sound too good to be true, they usually are. Practice stock trading the monopoly way – keep record of stock prices, dividends, capital gains taxes, commissions, profit/loss, dates and calculate over a period of time how much you would have lost/gained. It wouldn’t hurt to also create graphs/charts on the different stock market trades and look into their year’s history to see any patterns in timing against rising/falling stock and so on.
When looking into investing in the stock market make sure to take into account brokers commission charges, any other fees and, see what other people are saying about the brokerage in reviews (no doubt if they were no good someone will have stated it publically somewhere).
Although it can be quite pricy, Blue chip stocks are well known for their safety and quality which is what you’re looking for. It is advisable to look into these top indexes like the FTSE100 or Dow Jones etc.
One of the hardest things when investing in the stock market is taking risks – when you’ve invested in a market and it falls, your first instinct is to get out before you pass out, but patience can go a long way. In saying that, you need to learn the difference between a temporary fall and a crash – if you feel there is nowhere to go but down, sell and cross your fingers it was the right choice! You do want to aim to stay for the long run though – around 5 years minimum as some stocks can have bad years.
If you are worried about the risk of putting all your eggs in one basket there is a solution – pool investment funds. This, in terms of the basket analogy would be to put one egg in each basket – it spreads your money between investments (such as bonds/gilts or property) and shares. The attraction is if one fails you won’t lose as much money as you would have; again it all comes down to researching which pooled investment fund is best for you.
So, overall if you are considering investing in the stock market, go through the list:
Why do I want to do this?
Can I afford it?
Is there someone other than myself I have to support/provide for?
How much money do I have to invest?
Can I afford to lose?
Have I done my research?
Have I taken enough time to compare patterns?
Have I compared reviews?
What are the charges?
Which broker should I use?
Where shall I invest?
What type of investment should I make?
Am I prepared to risk it?
Am I patient enough to wait out the falls?
Have I got enough data to go on /researched for a good enough period of time?
Am I ready?
Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.