Investing in the stock market is a great way to generate wealth or income for your future!  Whether you’re saving for retirement or a shorter-term goal like education or even a wedding, investing in stocks is a good option.

The problem is you’re a novice and have no idea where to start.  Then read on my friend, and let us help you navigate what might feel like an overwhelming and confusing journey.

Money To Invest

The first thing you’ll need is money.  But not nearly as much as you think.  Depending on what type of account you open and what sort of stocks you plan to purchase, you can get started for as little as $50-100.

Then you’ll want to make regular contributions, which could be only $5 per week if that’s all you have to spare.  Obviously, more money provides more options for purchasing and the faster your money can grow.  But because of the magic of compound interest, even those smaller amounts will eventually add up. 

Set Up An Account

Hands off approach

Now you need an account to do your trading.  How you want to trade and defining your over-all goal will guide which sites you use.  For example, if you want to be relatively hands-off, you might opt for what are known as robo-advisor sites that utilize complex algorithms to choose stocks from diversified portfolios for you.  This would include sites or apps like Acorns or Stash. 

You can also choose a fiduciary or mutual fund manager to guide you through the process and make recommendations.  We at DYF Investing tend to steer clear of fund managers, largely due to poor performance and hidden fees, but it is an option you have available. You could utilize sites like Charles Schwab or Edward Jones for these.

If you are leery of fund managers in general, but still want a more hands-off approach, a fiduciary might be a good alternative.  Fiduciaries are actually required to make recommendations that are in your best interest, which as alarming as it may sound, mutual fund managers are not.  You can use the SEC’s look-up tool to find out if an advisor is a licensed fiduciary.

Hands on approach

But if you are as excited about getting your hands in the clay and learning to manage and trade on your own as we are, you’ve come to the right place!  At DYF Investing we are all about giving every single investor, from the novice to the well-seasoned, the tools and education needed to make good investment choices.

To trade using our system you’ll need a brokerage account.   This is something you’ll set up through a site like TD Ameritrade or E*Trade.  These sites (and other’s like them) allow you to make trades on your own with minimal fees.  These include accounts such as individual accounts or IRA’s.

For many investors we recommend a Roth IRA for its tax advantages.  The contributions you make upfront are not tax-deductible (as they are with a 401k for example), but the money is not taxed on withdrawal.  So when it’s time to enjoy your money, you won’t pay taxes on it again.  (However, penalties may apply for early withdrawals.  You should always be aware of the terms of your account.)

Once you’ve opened an account, you can make contributions as often or as seldom as you wish.  You can transfer money from a savings or checking account, set up a direct deposit with your employer, or even mail them a check.  As you fund your account, you can leave the money in cash as long as you need to, until you’re ready to start purchasing. 

Consider too that some of the stocks you’ll want to purchase might be pretty pricey.  For example $1,500 might be a “good” price to buy Amazon stock, but still well out of your budget.  Sites like Robinhood Investing or Schwab Stock Slices allow you to purchase partial shares so you can still own companies you want, but at chunks you can afford.

Begin Trading

Even though we said the first thing you need is money, you can actually open an account without making a deposit.  You just can’t buy until you’ve dropped in some funds.  But whether you fund it initially or wait a little longer to fund it, we recommend “paper trading” first.  This is a way to practice making trades that aren’t real.  Since you’re not using real money, you have nothing to lose!  (But you won’t make any money either, just to be clear). 

As basic as it may sound, paper trading allows you to explore settings and pages and familiarize yourself with the process. This makes you less likely to make mistakes – like hitting the wrong button or purchasing $1,000 of something when you meant to buy only $100.

We also suggest learning about the industry by checking out blogs like ours or perusing places like Yahoo finance.   Making good, solid stock picks takes a lot of time and research and some people will thoroughly enjoy this part of trading. 

Other’s however, will want to know just enough, but not spend hours each week doing research.  That’s where our System comes in handy, since we spend the time doing the work, then pass the information on to you!  Whether you do your own research or take advantage of ours, we encourage you to consider a long-term investment strategy like Value Investing.  This minimizes risk and has the potential to grow your money at a steady and consistent rate.

And then you should be set.  You have an account with at least a little money in it.  You’ve done some research and know what companies you want to invest in, and you’ve practiced with paper trading.  The final step is to pull the trigger and step into the wild and exciting world of investing!