Investment for Beginners: How to Determine Which Stocks to Purchase

Investment for Beginners: How to Determine Which Stocks to Purchase

You’re sitting in front of your computer, with a certain amount of cash set aside in your bank account, and you’re looking at the different stock portfolio platforms you can use to manage your stocks. You’re all ready to go, and then you hit a wall. With all of those stocks staring back at you, how to do you know which one to buy? How long do you want to keep your money in the market? What about options other than stocks?

These are all fair questions to ask – and important ones. If you are new to stock investments, take some time to do your homework. This is our investing for beginners overview:

  1. What Percent of My Portfolio Should Be Stocks?

There is a general rule of thumb that you should take your age and subtract it from 110 to find the percentage of your portfolio that should be comprised of stocks. This is because as you get older, you want less risk in your portfolio. But with more risk is a higher trade-off.

  1. Stocks or Index Funds?

An index fund enables you to invest in a multitude of stocks, all at once, as a bundled investment. This can be a great way to diversify your investment while minimizing your risk. However, if you’re ready to trade your luck, then going all-in behind one or two companies is a faster way to hit big monies – but also a quicker way to fall from grace.

  1. How Many Different Kinds of Stocks Should I Own?

Again, this is technically up to you, but if you ask us, we recommend buying at least 15 different stocks across a variety of industries to diversify your portfolio. Of course, this is not practical when first starting out, so try your hand at 2 or 3 companies during your first week, adding in a new one every subsequent week.

  1. What About Dividends?

In general, dividend stocks tend to be less volatile than their non-dividend counterparts; however, do note that just because a company pays a high dividend, that does not mean it’s going to be a better investment.

  1. And Finally, My Profit?

We advise you to adopt a long-term mindset when foraying into the stock market. In any given year, the market could tremendously gain or lose value. Profitability can vary. Know that all studies have shown the longer you keep your money in, the less volatility and more profitability guarantee you can count on since it averages out the bad market periods.

Lastly, do your homework. There is never a shortage of information you can be reading on markets, economies, companies, trends, etc. You don’t have to go at this blindly. If you have other friends or family members in the stock market, pick their brains, and ask them about which stocks they think are hot right now. Cross-compare your results, and get started with just a few companies every week. You want to have a proper manage on your portfolio.

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