Investing in Stocks: 101
Investing is not scary or difficult if you understand it. First of all, you need to understand with whom you have to work: the market is full of unscrupulous brokers. We have collected the primary information and created a simple guide for beginners so that you can figure out everything.
There are many misconceptions about investing: fraud, lottery, too complex, a topic that requires specialized training, and huge start-up capital. Not really.
First, you need to find a good broker with a state license, learn how to balance risks, read financial news, and create an initial investment portfolio. This might seem complex, but we’ll break it down for you.
Recession, crises, and pandemics are major negative factors that stop investing.
According to the International Monetary Fund, we will experience the worst recession since the Great Depression this year: the global GDP will drop by 3%. Indeed, some companies already had hit their lowest level for the past 3-5 years, according to the Dow Jones Industrial Average.
For earning money, you do not have to study each company’s details for the past ten years. Just start from simple stock investing in things you already know. For example, because of the customer shift this year, Adobe stock rose by 4%, with revenue of more than $3 billion.
When Lehman brothers were filing for bankruptcy in 2008-2009, Amazon grew its online sales by 29%. Lego moved to Asia and Europe and managed to increase its profits by 63%, giving hefty returns to its investors. These real examples prove: investing in crises can be practical and profitable.
After 2008, we already have learned that with a reasonable strategy, and with no panic, investors can earn good money. Each collapse is always followed by a recovery period, which is provided by exchanges and commodity instruments.
Follow Our Easy Guide to Investing In Stocks
Let’s take a closer look on how to start your investing journey.
Step 1: Choose How You Want to Invest in Stock
If you are interested in choosing stocks and funds by yourself
This is a responsible choice, but it might not be right for beginners. New investors should suppress the desire to buy everything that has fallen in price. They should keep in mind that the risks of increased fluctuations in the markets under the crisis can remain relevant, which is why short-term purchases, especially for newcomers, are risky in such conditions.
If You know funds and stocks are a great investment but prefer someone to do it for you.
Choose the investment service, broker, or adviser who will evaluate your risks and satisfy your investing needs. If you are not sure where to start, try out our Einvestment platform for investing. It is a licensed, multi-portfolio investing platform with more than 200 years of experience from different advisers and professionals.
We create an individual plan for each customer based on their needs and acceptable risks. Your strategy and goals may differ when you are in your 20s, 30s, 40s, and even 60s (such as retirement plans), but our plan will grow with you – which is just one of the many benefits of using an investment platform for beginners.
Step 2: Open an Investing Account
Currently, the market is offering accounts with a broker or with a Robo-adviser account.
With a broker, you can open an individual retirement account or a taxable brokerage account if you are already saving somewhere.
Robo-advisers were popular a couple of years ago. Currently, their prices have risen, but their analysis during crises is poorly designed. Broker accounts are safer during a pandemic, as the deals are analyzed by a person, not a robot.
Step 3: Choose between Investing in Mutual Funds or Individual Stocks during a Financial Crisis
Most people in the stock market choose between investing in mutual funds and individual stocks. Mutual funds allow you to buy a part of different stocks, which provides more diversity to your portfolio. If you like a single company, you can buy a couple of shares or a single share of it.
As a beginner, try both. If you invest in an individual stock, do not jump too fast from one company’s share to another.
Mutual funds are less risky and less likely to rise as individual stocks. Indeed, for the individual stocks, be prepared to invest and leave it alone for a couple of years to see real results. Jumping from stock to stock will not increase your assets. One great example can be Apple- Ronald Wayne might still regret it.
Step 4: Allocate a Budget and Investing Limits
When you start investing, prepare emotionally and physically for the amount of money you are ready to lose. Many beginners fail to control their emotions. Ask yourself what your emotional tolerance is.
Generally, the middle-age investor has 80% of their portfolio in stock funds; the rest would be the bond funds. The minimum amount to invest for an individual stock depends on the company you are interested in. We recommend investing no more than 10% in it.
Note, if, during a financial crisis or pandemic, one company keeps losing its market share, even during the recovery, it might not go up. J.Crew, Gold’s Gym, and Diamond Offshore Drilling have already filed chapter 11 for bankruptcy this year.
Stage 5: Start Investing
To become an investor, you have to invest. Learning all about bonds and stocks does not provide experience. Knowledge is power, but holding on to money and waiting for an economic upswing is not the right idea. At the end of the day, inflation may reach you, and you will lose more.
We suggest using your short-run individual funds to invest in a company that you are relatively confident about, or see the potential in.
All of the guidelines listed above are dedicated to beginners who are hesitant about investing. We believe, everyone should invest in stocks, no matter what the state of the economy is. Beginners can start from low-cost mutual funds, as it does not require big assets, and it does not have high risks.
The most important rule is to establish emotional barriers, decide your risk tolerance, and seek an adviser. Nowadays, there are many online platforms that allow you to invest during a pandemic.
Even during a crisis, it is not about how the investors fall, but how they bounce back. You can rely on this simple guide for investing, no matter what economic conditions bring you.