Investing in the stock market can be a great way to diversify your investments, and it can be fun to control which stocks you buy and sell. However, beginning investors will want to take some steps to prepare before sinking any money into a publicly traded company. Here are some strategies you can use to prepare for stock market investing.
Purchase A Guidebook
Understanding the jargon associated with trading is a key component to being successful. While nothing in the market is guaranteed, knowing how the market works and what the basic principles are can better position you for smart financial moves. Look for a simple stock investing book that uses clear language and offers examples to help you follow along. Highlight the passages you feel are important, and mark pages that have concepts you want to do more research on. This first step can make the process of trading a little more clear. If you have a long daily commute, think about purchasing the audiobook version of this guide so you can reinforce the concepts of trading and investing every morning and evening.
Hire A Financial Planner
Even if you want the fun of controlling your stocks, it's a good idea to consult with a financial planner. He or she can help you determine how much you can afford to spend on investments. This is critical because some of your purchases might end up losing money. You don't want to put yourself in a position where one bad trade causes financial ruin. You may even want to consider having the planner dole out an allowance if you aren't sure you can stick to your investing budget.
Plan A Few Mock Trades
Before you start investing real money, consider playing a stock market game. There are many sites online that let you buy, sell, and trade stocks as part of a competitive game. No money is spent, but you do get to experience some of the joys and challenges of investing. These sites typically provide you with virtual money to use as your startup funds, and then you are given the opportunity to start buying stock. Track your progress over a few weeks. Take this time to see where you were successful and in which areas you feel you need a bit more practice. Once you feel comfortable with the process, you may be ready to move onto the real thing.