My beginners guide to the stock market

The stock market is one of the best ways to make steady income over time. If you want to make 8-15% returns this is a good place for you. The economy is very volatile (has extreme ups and downs) but it steadily climbs over time. If you need to make some money fast the stock market is a real gamble. You could get lucky, like thousands did riding the dot com bubble of the late nineties, but it’s more likely that you’ll get burned and have a bad experience with the market.

Your Financial Goals

In order to make money in investing you need to have concrete goals established, something to work towards. If you’re under the age of thirty, think about being fairly aggressive in your investments. Thirty to forty, mildly aggressive, and over sixty you’ll become much more conservative.

Beating the Professionals

The odds of picking better stocks than the professionals is very low if you put in less time than your broker does. A lot of people pick stocks because they think it’s fun, but many do it because they don’t know any better. If you’re in the market to make money play it safe. Get into stock market index funds. You will get decent returns and even beat several, or most, professionals who haven’t learned that you can’t outsmart the market.

Start by selecting a broker. If you don’t want to do any thinking and don’t mind paying the comissions get a full-service broker. On the other end of things you can forgo a broker all together and use a larger brokerage house (T. Rowe Price, Fidelity, Vanguard, etc.) and do your trading online. I’m a big fan of Vanguard, they have very low expense ratios.

Picking Stocks

Again, I don’t really advocate picking your own stocks unless you have a lot of money to gamble or you really know what you’re doing. If you are picking your own stocks here are a few books I’ve read about stock picking that you might want to consider…

  • Rule #1 Investing. Phil Town
  • How to Retire Rich. James P. O’Shaughnessy
  • The Little Book that Beats the Market. Joel Greenblat
  • The Warren Buffet Way
  • Learn to Earn. Peter Lynch. 260 pgs.

You can also play around with UpDown, a site that allows you to play around with real stocks using imaginary money.

Index Funds

What I do recommend for newbies is that you find a good brokerage house online and then start putting money into a tax advantaged retirement fund (like a ROTH IRA) through indexes. To learn more about investing in index funds click here.

Tyler Christensen
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Tyler Christensen

Tyler is a husband and dad, professor, writer, web designer, and DIYer.
Tyler Christensen
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