Learning to invest toward your goals and understanding the different risks takes time, but it doesn’t have to be painful. One way you can learn to invest is to buy one fun stock. To get started, try investing in a company that you know well, perhaps one that makes products you buy. Read on for a step-by-step guide to learning how to invest by using a fun stock.
How To Start Investing In Stocks
When you buy a stock, you are essentially buying a share of ownership in a company. As the company grows and profits, so do you. You can get started with buying one fun stock to learn the ropes of investing by taking these essential steps, which are similar to what you’d do when investing seriously toward your financial goals.
Open a Brokerage Account
First, you’ll need to open a brokerage account. When choosing a brokerage, consider factors like the broker’s account minimums, trading fees, and commissions. If you’re just buying one fun stock, you may want to start with a small deposit, so consider a broker with no minimum balance requirements. Also look for broker with low or no fees and commissions.
Choose a Stock To Invest In
Once you have a brokerage account, you’re ready to start investing. The next step is to choose a fun stock to invest in. If you’re new to trading, consider buying shares in a business you’re familiar with or one with products you use. For example, if you are a Disney fan, you might buy shares in Disney (DIS). If you enjoy Coke, you might want to buy shares in Coca-Cola (COKE).
Understand the Risks
All investing carries risk. Investing in stocks can help your money grow, but you could also lose money when you invest in the stock market. When you decide on a company to invest in, take a few minutes to think about the specific risks. Is the company in a volatile industry or does it have major competitors that are gaining market share? What might affect its future performance? When choosing a fun stock to invest in for learning purposes, you should be prepared to lose all of your investment. However, you still can try to avoid a loss by considering risks associated with the company.
Decide How Much To Invest
Next, determine how much you want to invest in a company. For your trial-run investment, start small and assume you will lose your money. Traditionally, the minimum amount you can invest is equal to the price of a single share. If a company’s stock is trading at $50 per share and you want to invest, you can start by buying a single share for $50. You can find a range of share prices in companies on stock exchanges.
Monitor Your Investments
Once you’ve bought your shares, don’t forget to keep track of how they perform. You may decide to invest more money or sell your stock as it rises and falls in price.
Choosing a Stock
Choosing a stock to buy is a difficult part of investing. Every investor wants to make money. Ideally, you want to buy shares in a company that is poised for growth so the value of your stock will increase. Some stocks carry more risk than others—but some also have the potential for higher rewards than others. Finding stocks that fit your investing goals and risk tolerance is key. For example, if you are nearing retirement, you may want to invest in a stable blue chip stock that has lower returns but lower risk. If you’re a younger investor, you might want to take on more risk and invest in a new technology company that has the potential for more significant gains. For new investors, investing a small amount in a fun stock can help you get familiar with what type of stocks could be ideal for your portfolio.
Leverage Technology
You can invest in thousands of publicly traded companies in the stock market. Searching through all of them to find the right one for you can be difficult. Many investment apps and brokerages offer investing tools that you can use to search for opportunities. For example, you might want to screen companies based on their industry, market capitalization, and earnings-per-share to try to find a good investment opportunity.
What To Do When You Own a Piece of the Company
Once you’ve made your first investment, it can be tempting to simply wait for it to grow. However, investing is an ongoing process; you should have a plan for monitoring your portfolio after you’ve bought shares. Check your investments regularly to make sure that they still align with your investing goals and perform as you expected.
Should You Sell?
Timing when to buy and when to sell shares is a key part of investing. The goal of investing is to buy low and sell high, but for new investors, it can be especially difficult to know when that is. While monitoring your investments, think about what is affecting their performance. For example, if your shares have gained value, try to learn what contributed to the gains, such as whether they were company-specific or part of broader trends. Consider if you want to sell for a profit or continue to hold your investment. If your shares have lost value, ask similar questions about what drove them lower and whether it’s time to sell and cut your losses. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
