How do I Observe & Buy Stocks?

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Learn as much as you can about the stock market.
Learn as much as you can about the stock market. (Image: stock market analysis screenshot image by .shock from Fotolia.com)

Investing in the stock market can be one of the best ways to build a solid nest egg, but it pays to educate yourself before getting started. Learning as much as you can about the stock market and how it works before putting your hard-earned money at risk gives you a chance to assess your own risk tolerance, as well as your ability to pick winning companies and quality stocks.

Read as many financial publications as you can to educate yourself about the stock market and buying and selling stocks and mutual funds. Some of the best financial publications include the Wall Street Journal, Investors Business Daily and Barrons.

Review the stock tables in these publications and identify the various columns and what they represent. A full stock table includes the current selling price of the stock, the gain or loss for the day, the 52-week high and low and the earnings per share.

Choose a few companies you are familiar with and examine the financial data listed in the stock tables. These could be companies whose products you use, or just companies you hear about in the news.

Create a paper portfolio you can track over a period of months, or even a year or more. The stock market is intended to be a long-term investment, so there is no need to rush. Track the performance of your portfolio to assess your ability to choose stocks. If you find that your ability as a stock-picker is less than stellar, it is probably best to stick to no-load mutual funds instead of buying individual stocks.

Contact a mutual-fund company or discount stock broker and open an account when you are ready to start buying funds or individual stocks. Make sure you can meet the minimum required investment before completing the application.

Submit the completed application, along with your check for the initial deposit, to the address listed on the form. Check the address carefully, because some firms use a separate address for overnight mail.

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