How to Enter the Stock Market

With diligent research and the right attitude, anyone can invest in the stock market successfully.

Stock market gains are possible for the independent individual investor. Online stock investing does not have to be a losing proposition, but being successful in independent stock investing requires extensive study and research as well as self-control. Study the methods of the best, and absorb their wisdom, and you might be able to duplicate their results.

Things You'll Need

• Brokerage account
• Money to invest

Instructions

1. Study the greatest stock market investors in history and learn what they have to teach you. Learn about value investing from Warren Buffet and his disciples, and study the books of William O'Neill, a stock market guru for generations. Choose a style of investment or trading that best suits your personality and circumstances, and focus on that style alone.

2. Sign up with an online stock brokerage. Choose a well-known broker with a solid reputation, and one that offers the services you think you will need, and evaluate the commission rates and minimum balance requirements. Also, note any educational resources the brokerage offers.

3. "Paper trade" before you risk real money. This will enable you to test the system or investment method you have chosen. Most online brokers offer this service. You will be given a hypothetical balance of, for example, $1 million, and you can "invest" that money in any stock you want. The simulation account will then track your "profit" or "loss." Do this for several months until you are able to consistently make gains.

4. If possible, trade stocks from sectors you might be familiar with. For example, if you are a doctor or work in health care, trade in the health care sector. If you are a realtor, buy and sell home builders or related stocks. If you do not understand a company's business, it is unwise to trade in their stock.

5. Study market trends. Understand when the overall market is going up or down. Trading with the direction of the broader market is probably the best decision you could make, according to William O'Neill.

6. Be wary of penny stocks. Although it is possible to make a fortune trading penny stocks, it is also easy to suffer huge losses. Penny stocks are stocks listed at the $5 and under price range. Most of these companies are extremely unstable and trading in their stocks is best left to professionals.

Tips & Warnings

• Diversify your portfolio with a mix of micro, small, mid, and large cap stocks.

• Do not sell too soon. Often you will find that the price of a stock dips as soon as you buy it. Rather than impatiently selling the stock, hold onto it for at least a few months and see if it stabilizes.

• Hold onto the stock for the long haul. Although it is possible to rake in some serious cash with swing and day trading, the taxes are much higher. Rather than pay 35%, you would only have to pay 15% if you hold onto the stock for at least a year.

References

• "How to Make Money in Stocks: A Winning System in Good Times and Bad"; William O'Neill; 2009
• Stocks, Investing, Business and Financial News