If you think you are ready to buy your first stock, you should know a couple of things since you are a beginner. This will help you start on the right foot and choose the right thing to invest in if you are a beginner in trading.
Here’s a brief guide that shows what you should look for and what to stay away from. Choosing your first stock is an important thing, so we made sure this is beginner-friendly.
Rethink your goals
Think about why you want to invest in stocks. Is it a part of your retirement plan, passive income, or trying it out and learning something new? Maybe you want to save money for your car this way. Whatever the case, you should follow the general rule: don’t invest more money than you’ll need in the next three to five years. Don’t go too big at once. Start small, step by step. This will make you more mentally prepared, and you won’t fall into the trap of investing in impulse. This way, when there are ups and downs on the stock market, you won’t be fretting over it.
Opening a trading account is a must if you want to start investing. You can also find a broker that suits your needs the best and can offer you a productive advice piece. Do some research online and learn about investment by yourself, as well. Regarding online stock trading, it’s mostly free, but it can come with fees, so check that out and see which offer the best option.
What are the characteristics of a good beginner stock?
There is a concept amongst traders called “wide moat.” Warren Buffett’s way of investing inspires it, and it means exactly what you imagine. If you have a sustainable and competitive advantage, it is difficult for competitors to steal a market share. That is what you want to aim for when you start investing in stocks.
Three basic metrics you should know.
Identifying great businesses to invest in is far more important than cheap stocks. A great company can benefit you in the long run, even if you have to invest more.
The three most essential ratios can help narrow down finding profitable businesses: P/E ratio, PEG ratio, and Payout ratio.
There are many other metrics, but these three are the most popular and the most important to learn initially. Research as much as you can about it and practice before investing!
Check out your surroundings.
Be someone who knows what’s going on around you! Everything affects the stock market; the economy, politics, climate change. You will see how much more general knowledge you will have, and you will want to learn more about it every day, once you realize how important it is for trading and your life! Stay informed, and educate yourself. With so many websites that offer a great source of knowledge, to videos that can help you learn faster, it is really up to you how you will improve in this department. Once you feel confident enough, start trading small and learn how to grow it steadily. Good luck!