Someone asked on Quora for advice on resources for getting started on investing in stocks. This is a common question many people have since a lot of people want to invest, but are scared to start for fear of losing money. Since investing, when done properly and responsibly, is a great way to build wealth, I thought I would repost my answer here for anyone else looking to start investing.
The fact that you are asking the question illustrates that you are taking investing seriously, which is a great first step. The stock market can be very complicated and many people don’t take the time to do their research before starting to invest.
As others have already said, pretty much every online broker offers a wide variety of tools and research to bring you up to speed on the market. I would also recommend going to your local library and picking up a few books about investing.
Next, I would recommend opening up a paper trading account and using that for a few months before you actually invest any real money. The Thinkorswim platform by TD Ameritrade offers the ability to set up a paper trading account. This essentially allows you to buy and sell stocks, bonds, mutual funds, etc without using real money. This way you can try various strategies and test their outcomes before you start risking your own money.
Finally, keep it simple. When you’re first starting out, everything is going to seem complex. Chances are you aren’t going to have the knowledge to properly invest in complex securities like bonds or options, so stay away from them. I probably wouldn’t invest in individual stocks either. It’s very difficult to pick one stock and be correct. The better path is to invest in groups of stocks or an entire index through a mutual fund or Exchange Traded Fund (ETF). The S&P 500 has gained an average of almost 10% each year since 1928 and around 11% for the past six years. So buying a mutual fund that tracks the S&P 500’s performance is a great way to earn solid returns over time. Vanguard has a lot of low cost index funds to choose from or you could go with the S&P 500 ETF (symbol SPDY) Just remember that the 10% is over time, no stock or market goes up all the time, so be prepared for the inevitable downturn.
Whatever you do, just stay committed and remember investing can be difficult. There are going to be ups and downs. However, if you take it seriously and truly put in the countless hours to learn and improve, investing is a great way to build wealth.
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