Once you’ve built your portfolio, you can also re-invest any earnings or dividends to help build growth over time.
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You can start investing in stocks through a brokerage account or by using a robo-advisor.
But you should establish goals, review your financial situation, and determine your risk tolerance first.
Rebalancing your portfolio periodically will help you keep your investments in good shape.
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Looking to maximize your money and beat the cost of inflation? You want to invest in the stock market to get higher returns than your average savings account. But learning how to invest in stocks can be daunting for someone just getting started.
When you invest in stocks, you’re purchasing a share of a company. They’re basically a slice of ownership in a company that can yield returns if it’s successful. There are various ways to invest and leverage your money. But there’s a lot to know before you get started investing in stocks.
Step 1: Figure out your goals
It’s important to know what your fundamental goals are and why you want to start investing in the first place. Knowing this will help you to set clear goals to work toward. This is a crucial first step to take when you’re looking to create an investing strategy later on.
If you’re unsure of your goals, first review your financial situation, such as how much debt you have, your after-tax income, and expected retirement goal date. Knowing when you plan to retire can let you know your overall time horizon – or how much time you plan to hold onto your investments to reach your financial goal.
Based on that information, you can start figuring out your investing goals. Do you want to invest for the short or long term? Are you saving for a down payment on a house? Or are you trying to build your nest egg for retirement? All of these situations will affect how much – and how aggressively – to invest.
Finally, investing, like life, is inherently risky And you can lose money as easily as you can earn it. For your financial and mental wellbeing, you want to consider your appetite for risk. This is typically referred to as “risk tolerance” or how much risk you can reasonably take on given your financial situation and feelings about risk.
Quick Tip: You can take this investment risk tolerance quiz created by Rutgers to see where you stand and help inform your asset allocation.
Step 2: Determine your budget
Once you’ve got some solid goals set, it’s time to review your budget. Here are some things to consider:
Your current after-tax income. Many people look at their pre-tax income, but you want to know how much money you’re working with after taxes which can help you create a realistic budget.
Your expenses. How much are your monthly expenses? …read more
Source:: Business Insider