Are you a beginner who wants to invest in the stock market but doesn’t know how to start? Well! This article is for you. When I was new to the stock market, I used to think the stock market was a bad thing, and It was normal because I saw mostly people around me cursing the stock market for their loss.
However, later, I researched by myself and got into the stock market as a beginner. Initially, I made a few mistakes, but soon, I understood what I needed to do and what I shouldn’t.
So, In this article, I’ll share my personal experience with Investing, how I started as a beginner, how I pick up stocks with little money, what mistakes I’ve made, which mostly beginners can also make, and many other important things that will help you to invest in the stock market as a beginner.
What is a stock market?
Stock market is a huge place where you can buy and sell tiny pieces of big companies, and these pieces are called shares or stocks.
Let’s say you really like tech companies such as Apple, Microsoft, Amazon, etc. So, you can actually own a small part of these companies through the stock market.
If the company in which you’ve invested does well, let’s say Apple, which sells iPhone smartphones, personal computers, etc. So, the value of your share will increase, and you can sell these shares for more than you paid to buy them.
You can invest in your favorite brands through the stock market. According to a Forbes report, more than 3,700 companies are listed on the Nasdaq for trade, the second-largest number of stocks.
You might be surprised to know that if you’d have invested just $1000 in Apple back in 2000. it would now be worth more than $100,000. Surprising right? If you’d invested just $1,000 in Netflix in 2010, when it was known as a DVD rental service, you’d now have about $45,000.
Also read: How to Invest $10k
Is Investing in the Stock Market Risky?
When you buy a stock of any company you get a small ownership stake in that company which we call a ‘share,’.
If you invest money in your friend’s business or a relative’s business, and that business doesn’t do well, you will lose your money. That’s the risk involved.
Investing in the stock market is a real business; it’s similar to Investing in your friend’s or family member’s business; if it does well in the future, you get the profit, and if it doesn’t perform well, you’ll lose your money. Just like how the stock market works, as I’ve said before, there are over 3700 companies listed on Nasdaq.
Besides this, I also gave you examples of Apple and Netflix. If you had invested $1k in Netflix in 2010, now you’d have around $45k. If you’d invested $1k in Amazon, now their worth would be more than $100k. It’s because these companies grew by the time, on the other hand, there would be many companies that would have been bankrupt.
In simple words, Investing in the stock market is putting your money in real business. Profit and loss and ups and downs is the simple law of business.
You’ll lose money, you’ll earn money, every day you’ll see ups and down, but if you’ve chosen good stocks and you’re fully aware of companies like what it does, and what could be its future, undoubtedly you’ll make money from the stock market as a beginner.
If you aren’t aware and don’t pick good stocks, then it can be risky. However, every company and its owner try to do good and take the company to the next level.
Why Do Companies Sell Shares?
Suppose a company wants to grow. It may want to open more stores, create new products, and hire more people to work. To do all these things, the company will need money.
To get money to expand, a company has mainly two choices: either they can take a loan which they’d have to pay back with interest.
Secondly, the company’s owner can sell a small portion of the company to the public.
By selling company’s some portion in the form of shares, they raise the money without going into debt.
So, If you buy those shares, you will become a part-owner of that company. Now, as I said before, If the company does well, your share will be more valuable, and the company will also get success by expanding it more because of investors like you.
Also Read: How to double $10k quickly
How to Make Money in the Stock Market As a Beginner?
There are mainly two ways you can make money from stocks as a beginner, although some people earn from trading, which is also a part of stock market, but it’s not an investment.
Two ways to make money from the stock market are Capital gains and Passive income from dividends.
Capital Gains
When you buy a stock at a specific price and sell it later at a higher price is called capital gain.
For example, if you buy a share of any company, let’s say Amazon, for $100 and later you sell it for $150, you’ll earn $50 profit, which means your $100 capital is now worth $150.
Dividends
Most large companies give dividends to their shareholders, which is part of the company’s profits.
For example, if you own shares in any company, such as Coca-Cola, that pays a dividend after making a good profit.
In dividend you get a small amount of money for each share you own. It’s like getting a bonus for being part of that company, many pay once or twice a year, it’s passive income because it can also be reinvested.
What Types of Investments Can You Make as a Beginner?
There are many best ways for a beginner to make money from the stock market. The main types of investments you can choose from are as follows:
Individual Stocks
You can buy Individual stocks of any companies that are listed in Nasdaq or NYSE (the New York stock exchange). Over 3700 companies are listed on Nasdaq such as Apple, Microsoft, Tesla, Alphabet, Amazon, etc.
Index Funds
It’s another type of investments which track a whole stock market. For example, an S&P 500 index fund allows you to invest in the 500 biggest companies listed in the U.S. Investing in Index funds is like owning a small piece of multiple companies at once or buying a bouquet instead of a single flower.
Bonds
When you’re buying a bond, you’re giving your money to a company or the government. In return, they’ll give you interest. Investing in bonds is a safe choice if we compare it to the stock market, but the downside is it gives lower returns.
Real Estate
You can invest in property related companies if you don’t have more money upfront. Such as buying stocks of real estate related companies like American Tower Corp. Besides this, if you have a good amount of money then you can simply rent a place and rent it.
How to Invest in Stocks for Beginners with Little Money?
Here are some simple steps that will help you invest in the stock market confidently as a beginner.
Research and Learn
It’s said that, Not investing in the stock market is more dangerous than investing in it. But it doesn’t mean you blindly put your money in a company without knowing about it.
Before Investing, try to understand some important things about the company, such as:
- What the company does such as Apple sells phones, Tesla sales Car, Amazon Provide provide services, and Coca-Cola provides beverages (just try to understand the business)
- Through a stock screener website like Finviz, try to find out if the company is making money.
- Does the company grow over time?
- How much debt the company has
- How strong is the competition? For example, who is competing with Amazon, or which company is doing better?
- Have people been talking good or bad about the company where you want to invest recently?
- Is the stock price fair?
These are some simple questions, who answered you should find out before making any investment, especially if you’re looking for long term investment.
Also Read: How to save your first $100k fast
Open a Brokerage Account
To start investing in the stock market you need to open a broker account which will help you buy and sell stocks.
There are many online brokerage apps such as Webull, Robinhood, Charles Schwab, etc. Many stock broker apps even let teens open accounts with their parents’ permission.
Start Small
Many people don’t know how to invest in stocks for beginners with little money because they’re confused about whether they can start with little money or not.
Well! You don’t need a lot of money to start. Even $100 can be enough to buy your first stock, I myself started with around$150. Over time I kept learning, then I invested $1,000 and got 25% return with the first year.
Be Patient
Investing is a long-term game, a few people also earn good in the short term but in the long term it’s highly profitable.
Always remember one thing: you won’t get rich overnight. The stock market goes up and down every day, so you need to stay calm and give your money time to grow. Trust me, if you’ve chosen good stocks, then in the long run, you’ll make a profit.
Common Myths about the Stock Market that People Have
Here are some common Myths about the stock market; let’s clear up some of them:
Do you need a lot of money to invest?
No, that’s not true! You don’t need to have a lot of money to invest in the stock market, even though I’ve started with just $150, and you can also start with as little as $50.
Nowadays, many brokerages offer fractional shares, which means you can buy a piece of a share if you can’t afford a whole one because it’s expensive, such as Amazon’s single share worth around $170+, and it’s the same with Tesla, Alphabet, Apple, etc. They’re expensive but still you can invest in them taking the advantage of fractional shares.
Investing is like gambling?
Nah! I laugh a lot when I hear things like that from people who don’t know anything about Investing.
In my own opinion, it can be gambling if you’re doing intra-day trading when you buy stocks in the morning, borrow some money from a broker or friend, and then sell stocks before the evening.
Losing money everyday, it’s kind of gambling but still not completely gambling, and that’s only with Intra day, cause you’re losing money, investing is when you trust the company, and it’s way of buisness, you trust that the company will make profit in future, so it’s not gambling, it’s investing, it’s business.
In investing, you’re putting your money in companies that have a good chance of growing and making money in the future, not just rolling the dice.
Is the stock market too complicated?
Not really! In the beginning, it can seem complicated to many people, but once you understand the basics, it’s not that hard. And the sooner you start, the more you’ll learn.
There’s nothing fancy in the stock market, and it’s not completed; you just have to do some simple things.
- Understand What is the Stock Market
- Create a Broker Account
- Pickup Good Companies
- Invest money
- Gain capital and earn dividend income
It’s too simple.
Smart Investing Tips for Beginners
Here are some important things that you need to know especially when you’re a beginner and want to start investing in the stock market.
Diversify your Portfolio
Diversification is the most important thing when you’re thinking about investing for a long term. Because you don’t want to lose any money. So don’t ever put all your money into one company.
Spread your investments across different types of companies in different sectors. Besides this, put some amount in bonds and funds. In this way, even if one of your companies goes down, the others might still be doing well.
Set Goals
Why should set a future goal, so ask yourself why do you want to Invest? You want save money for the future, for college, car, foreign trip or something else. Setting an Investment goal can help you invest accordingly.
According to your goal, you can decide how much money you should Invest, whether you invest from your monthly income or do any side hustles to make extra money.
Stay Informed about the company you have invested in
Always stay informed about the companies or funds you invest in. You can read news and pay attention to trends, In case you see any bad news you can sell the stock or buy more.
For example, In 2021, Portuguese star Cristiano Ronaldo moved a Coca-Cola bottle, and the share price also dropped its value from $56.17 to $55.22. In total, Coca-Cola dropped $4B in the company’s market value.
In my opinion, it was a great opportunity. If I had already owned Coca-Cola stocks, I would have sold them after hearing the news.
Then, after a few days, I’d buy them back because I knew the company was good. The drop in stock price was just because of Ronaldo’s action, and I believed that people would soon forget about it, and the stock price would return to normal.
So that’s the benefit of staying informed of stock market related news, especially when you’re investing in a company.
Don’t get Panic
As I’ve said a couple of times, the stock market goes up and down (It’s the basic low of any business), but that doesn’t mean you should sell every time the price drops. Stay calm and think long-term.
Most companies do well in the long term, sometimes you can see drops even for a week, you can just read news but don’t sell it.
How to buy stocks for beginners?
- Open a brokerage account: First and foremost, you’ll need a stockbroker account like Robinhood, Fidelity, or Charles Schwab.
- Deposit money: After creating a stockbroker account, you’ve added some money, which you’ll use to buy stocks.
- Choose the stocks you want to buy: After doing some research and knowing the company, you think it will grow. If you’re a beginner, it’s good to pick well-known companies with a strong history, such as Apple, Amazon, Alphabet, etc.
- Buy the stock: Now you’ve an account and have money in it, then open it and search for the stock you want to buy using (for example, Apple).
- Enter how many shares you want to buy and click “buy.”
- That’s it—you have invested in the company and own part of that company.
- Hold and watch: Once you’ve bought your stocks, check on them regularly without getting into don’t panic.
If the prices go up and down don’t get surprised. Stocks fluctuate every second, but if you choose good stocks you’ll get good profit in future.
How Long Does It Take to See Results in the Stock Market?
Honestly speaking, in real-time, you’ll start seeing the result as soon as you buy your first share as a beginner. You’ll see ups and downs every second, because it’s real time tracking in business.
But keep in mind, Investing isn’t a get-rich-quick scheme. So, It’ll take time to grow your capital. But the longer you leave your money invested, the more it can grow.
I’ve given you examples of Amazon and Netflix. So Patience is key, don’t panic, stay informed.
Can a beginner make money in the stock market?
Yes, you can make money in the stock market as a beginner. You just need to pick-up good stocks and have patience. If you do so, then in the long-term any beginner can gradually grow their money. I myself have grown it.
If you’re a beginner you should still focus on learning the basics, initially you should invest a little amount.
Don’t go for trading or follow any other get-rich-quick strategies. Remember that you’ll gain experience over time, and then you can make smarter decisions. So, right now, I am focusing on learning the stock market as a beginner.
At what age can you start investing in stocks?
You need to be at least 18 years old to get into the stock market. A teenager can’t start it alone. But with parents’ help you can Invest.
How to invest in stocks as a teenager
Great question! In the U.S., teens under 18 can still invest in the stock market, but they’ll need a parent or guardian to help. Here’s how it works:
How to invest in stocks as a teenager?
Firstly, you need to be at least 18 years of age to invest in the stock market by yourself. But if you’re a teenager then you can open a Custodial Account with your parents or guardian help.
Since you’re a teenager, the custodial can let you invest in stocks, but your parents or guardians will manage that account until you, as a teenager, turn 18 (or 21 in some US states). After that, the account will be transferred fully to you.
So if you’re 13, 15, 16 or 17, tell your parents to help you in opening a Custodial Account with a brokerage firm.
