If you want to grow your money you have to do something positive with your cash rather than leaving it in the bank and a popular option for many involves investing in stocks.
Investing in the stock market might seem a daunting proposition when you are a novice investor but as long as you understand the fundamentals of stock selection and creating a portfolio it will soon become clear that this is a potentially lucrative way to generate a profit.
Here are some key points to consider.
What sort of person are you?
It is important to align your investment strategy with your personality so that you are comfortable with the risks you are taking.
It is a good idea to decide what sort of risk-profile you have as some people are extremely cautious while others might be prepared to gamble in order to achieve higher returns.
There are stocks that generate modest but steady gains with a minimal downside because they are an established business and there are other propositions such as biotech companies, for example, whose share price could soar if they develop a winning product, but slump if it fails to take off.
Decide what level of risk you are comfortable with and pick stocks that meet those criteria.
Pick a broker
Another highly relevant decision is to select a broker who can help you invest and provide the platform required.
Find a broker whose site you find easy to understand and where they cater to investors who need a bit of help and guidance on getting started.
Opening an account
Check whether your broker requires a minimum deposit requirement and be prepared to provide identity documents so that your details can be verified before your account is fully operational and you can start trading.
You should be prepared to pay your broker a fee or commission for processing your buy and sell transactions.
Some brokers charge small or even zero fees but there is often a reason for charging zero commission and other aspects of their services might be cost-prohibitive in order to compensate for this.
Check you are happy with the fees and commission structure before you sign up.
Look at mutual funds
If you really don’t know where to start with your investment portfolio or don’t want the responsibility of picking individual stocks you might want to consider investing in mutual funds.
This is where a fund manager picks a portfolio for you and you invest in their fund as a whole rather than in individual stocks.
There are ongoing fees attached to this service which will be deducted from the value of your holdings from time to time.
The main point to remember is that you can start investing in the stock market with a small amount of capital and it often pays to diversify rather than put all of your cash into one stock or across one specific industry.
A balanced portfolio means you spread the risk and it should help you to make a profitable return on your investments over a period of time, although that is not guaranteed, of course.