Simply put, people invest their money in order to make more. There are many good investment opportunities that arise everyday, but like anything, there are also bad investment opportunities.

Before jumping into the stock market, consider:

1. How much capital is available to invest…
Believe it or not, many people make the mistake of going “all-in” by cleaning out their entire savings account to begin investing. This is not the smart thing to do because one bad investment can significantly damage your capital. First things first, you should find out your net worth. Net Worth = Total assets-Total Liabilities A good amount to begin investing is about 5% of available capital.

2. Risk Tolerance…
Are you generally conservative, aggressive, or somewhere in between? Every one can afford to gain, but how much can you afford to lose?  (ex. A retired person has more to lose than a bachelor in college)
Keep the risk tolerance in an acceptable range based on your personal goals.

3. Types of stocks you will invest in…
Invest only in things you understand! For example, if you don’t know anything about computers & technology, choose a different sector of the market.

4. Saving emergency money…
Emergencies happen to everyone! Do Not use this money to invest!

Now that you know how much you can invest and what you want to invest in, you will need a brokerage firm to buy and sell the stock. Here is a great list that will help you choose based on your needs/financial situation.

Once you have found a broker, you will need to sign up and transfer funds to the account. Within a few days you will be able to buy and sell shares of stock.

When I first began to trade stock, I was lost in terms of what stocks to buy, when to buy, and especially when to sell. Start looking for some educational books and learn as much as possible.

There are 3 major types of investing:
Which one are you? (You can be more than one)

1. Growth Investing…
Investing in a company that you are expecting to grow in the next 1-5 years

2. Value Investing…
Finding a financially solid company that is trading at a discounted rate. Use the Price to Earnings ratio to find under valued stocks. P/E ratio = Price(per share)/Earnings(per share) Anything 12 and under is considered a great value. Great book about Value Investing here!

3. Income Investing…
Investing in stocks that pay regular payments every quarter of a year. These payments are called dividends. This is a conservative strategy that produces steady, almost guaranteed income.

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