How to Get Started in the Stock Market When You Know Nothing

Getting into the world of trading can seem daunting. Here are the key things to consider if you’re just starting out.

Transcript

00:00Before investing in stocks, it's important to do your homework.

00:07Here are some key things to consider if you're just starting out.

00:11Your investment strategy depends on what exactly you're investing for.

00:15Be prepared to know your investment goals when opening a brokerage account.

00:19These could be saving for retirement, buying a house, or even college tuition.

00:23Your goals can change over time, and you'll need access to some investments sooner than

00:28others.

00:29Ask yourself, how much of your investment can you afford to lose?

00:33Since some stocks are riskier than others, you should focus on stocks that match your

00:37personal risk tolerance.

00:38If you're living paycheck to paycheck and you need money for next month's rent, you

00:42have a low risk tolerance.

00:45That means you should choose investments that are more conservative and risk-averse, such

00:49as a high-interest savings account.

00:51In the beginning, your portfolio might look like more bonds and fewer stocks, but as you

00:56become more financially stable, that ratio might flip-flop.

01:00Just because you want to start trading stocks doesn't mean you need to be an expert.

01:04Some prefer to take a more active approach in managing their investments, but there's

01:08also nothing wrong with leaving it to the pros or putting it on autopilot.

01:12Either way, it's a good idea to practice first with a stock market simulator, which can boost

01:18your trading know-how without risking your money.

01:21Finally, since trading is inherently risky, you'll want to mitigate that by spreading

01:25out your investments across a wide variety of assets.

01:29In other words, don't put all your eggs in one basket.

01:32And if your starting budget is limited, consider mutual funds and exchange-traded funds, which

01:37tend to own a large number of stocks, aka more diversified than a single stock.