Investing is setting aside some money, while busy with life and work, and allowing the money to work for you. The benefit of investment is that you get to reap your labor rewards in the future without running around organizing or managing things. You can view the investment as saving money you are not using now to get more funds imminently.
The investment’s ultimate goal is to put your money in different investments to grow your money in time. If you are new to stock investments, there are some things to take note of to maximize your returns and minimize your costs. Here are some things to consider if you are new in stock investment:
Commissions and Fees
There are no free lunches in economics. Your investment broker needs to make money one way or another. In this case, you’ll pay a commission to the brokers every time you trade a stock, either by buying or selling.
The trading fees range between $2 and $10 per trade. For instance, NASDAQ: SBLK, the average price target is $10.20. Depending on your trading frequency, the trade fees accumulate at a high rate determining your profitability. It can be very costly to invest in stocks if you are the type of person who frequently hops in and out of positions. Besides, if the amount of investment is small, the investment will be expensive for you.
Note that trading is placing an order to buy or sell in one company. Therefore, if you choose to purchase stocks from three different companies simultaneously, you will have three different trades. Moreover, you’ll have to incur costs for every trade made.
Diversify and Minimize Risks
Change is the only available free lunch in stock investment. If you decide to invest in several assets, you minimize the risk of one investment performance. In return, this will affect the other investments’ overall return. Diversification is the financial jargon of not putting all the eggs in a single basket.
You can therefore consider mutual funds or exchange-traded funds. These two securities offer a lot of stocks and different investment options within the funds. Consequently, any of the securities offer a diversified fund as compared to a single stock.
What Type of Investor Are You?
Prior to investing your money, it is essential to know what kind of an investor you are. You can decide to be the investor that actively manages their money’s growth. On the other hand, you can also decide to be inactive, invest, and pay less attention to the investment.
When you know the type of investor you are, then it is easy to get a broker. There are either discount or full-service brokers. A full-service broker offers you fiscal knowledge for retirement, medical care, and anything related to money. However, full-service brokers deal with clients worth a lot of money, and they are expensive. They charge a percentage on transactions, the assets they manage, and an annual membership fee.
Discount brokers give you tools to select and place your won transactions. Discount brokers also offer Robo-advisory service to inactive investors.
Invest Through Your Employer
If you are on a tight budget, there is no need to break your back trying to get an investment somewhere else. Use what you already have. You can start with investing a certain percentage of your income into the retirement plan available at your workplace. The best part about this investment is that you will not miss a contribution.
Moreover, work-based retirement investments are deducted from your paycheck before the calculation of taxes. The contribution is less painful, and you will even forget you are investing in something. You will be the set it and forget it type of investor. Moreover, if you get comfortable with the percent, you can always increase your contributions as you get more pay.
Investment is an excellent deal for your future. Moreover, you can invest with the little amount of money that you have. Therefore, as a beginner in investment, it is essential to be aware of restrictions you might face and what type of investment is best for you. You must do your homework on commissions, trading fees, deposit requirements, and the excellent broker for you.