†Advertiser Disclosure: Many of the card offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.
Investment. Many people have heard this term and figure that it is something that can be profitable, but it can seem complicated and risky, making it easy to shy away from if you happen to be a member of the population that are investment beginners. The fact is, investment can be a safe way to successfully generate new income that you would not have had. What’s more, there are lots of options for investment beginners, ranging from stocks and bonds to mutual funds and ETFs. It’s all a matter of doing your research and figuring out what mode of investment is best for you.
The decision between a high-risk, high-return investment strategy and a low-risk, low-return strategy should depend, in part, on your investing time frame. Conventional wisdom states that the farther you are from retirement, the more risk you can afford to take. That means a stock-heavy portfolio in your 20s, when you can afford to chase returns. Then, even if your portfolio takes a hit during a recession when you’re in your 30s, you’ll have time to make up your losses before you retire. By the same logic, the closer you are to retirement, the more you likely want to focus on preserving your gains and avoiding too much risk.
Mutual funds. A mutual fund is a basket that contains a bunch of different investments — often mostly stocks — that all have something in common, be it companies that together make up a market index (see the box for more about the joys of index funds), a particular asset class (bonds, international stocks) or a specific sector (companies in the energy industry, technology stocks). There are even mutual funds that invest solely in companies that adhere to certain ethical or environmental principles (aka socially responsible funds).
But since there is virtually no risk, there isn't much interest. The interest is comparable to higher savings accounts (many of the highest-yielding 1-year CDs currently pay a little over 2 percent). There are even some banks that offer no-penalty CDs, meaning if you need to withdraw the money early, you won't get hit with a fee. Still, if you're worried that you might need your money, you may be better off finding a savings account that offers as much interest as possible – since you will be able to withdraw your money without a fee.
Mutual funds come with fees. There may be charges (or "loads") when you buy or sell shares of the fund. The fund's "expense ratio" is expressed as a percentage of total assets and pays for overhead and management expenses. Some funds charge a lower-percentage fee for larger investments. Expense ratios generally range from as low as 0.15% (or 15 basis points, abbreviated "BPS") for index funds to as high as 2% (200 BPS) for actively managed funds. There may also be a "12b-1" fee charged to offset a fund's marketing expenses.
How to get going with just $5: If you really want to start small you can use an app like Stash or Acorns. Both allow you to begin investing with just $5. Stash offers you a choice of several funds to invest in. You basically end up owning part of a stock -- similar to sharing your apartment with roommates. Acorns allows you to deposit "spare change" from say, your coffee purchase. When you get to $5, the app invests that money for you into a diversified portfolio (basically, a mix of stocks and bonds).
Full-service brokerages -- This label is given to traditional brokerage firms, primarily those that operate out of brick-and-mortar offices. Their main selling point is service, meaning that they offer more than just the ability to place a trade. A full-service brokerage firm might offer retirement planning help, tax tips, and guidance on which investments to buy or sell. Full-service brokers offer more hand-holding, and will probably even mail you a “happy holidays” card in December, but this service comes at a luxury price tag.
Investing in stocks can be very costly if you trade constantly, especially with a minimum amount of money available to invest. Every time that you trade stock, either buying or selling, you will incur a trading fee. Trading fees range from the low end of $10 per trade, but can be as high as $30 for some discount brokers. Remember, a trade is an order to purchase shares in one company - if you want to purchase five different stocks at the same time, this is seen as five separate trades and you will be charged for each one.
In third place, earning a recommendation based on its platform alone, is E*TRADE. E*TRADE's web-based trading platform, Power E*TRADE, is a great environment for any beginner stock trader. It's easy to navigate, fast, and includes usability upgrades perfect for new investors like paper (practice) trading. Use E*TRADE's website to conduct research, watch educational videos, and read a large selection of articles covering the full spectrum of investment-related topics. Read full review
CONSISTENT DIVIDEND GROWTH is what has been working. I did start with high yield stock and it was nice to see the dividend income but my total portfolio growth was not where it should have been. What can I say? I was a newbie dividend investor and I wanted to generate retirement income from my portfolio and that’s what I was doing – only generating income and not growing my portfolio. In my strive to become a better investor, I stumbled upon the 10% dividend growth, the chowder rule, and the total return value of a portfolio. Let me show you why those 3 concepts matter.
Stock market returns have annualized 10% before inflation and 7% after inflation for over 100 years, but can be extremely variable from year to year. From 2000-2015, for example, the compound annual growth rate of the S&P 500 was 4.2%. Don't count on 10% return, if you are investing for a short time frame, or if you are also invested in bonds and alternative investments, which have lower expected returns. Furthermore, remember that past performance does not guarantee future returns.
Buy individual stocks. $100 might not buy you a lot of stocks, but investing in one right stock may make you money. Using a discount broker, such as Ally, can help keep your trading fees down. Ally offers research tools to help you choose the right stock. Investing in individual stocks rather than ETFs can help you do better than the market average. You can start investing with no minimum deposit on Ally Invest.
Amelia Josephson Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia's work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
First and foremost: If you prefer professional guidance at any point, there are many reputable brokerage firms available online and in-person geared toward helping you make lucrative investments. However, you should keep in mind that firms and brokers are associated with separate fees, including commission, which can bring up your expenses considerably.
If you're going to be investing in individual stocks, or mutual funds and ETFs that aren't commission-free, you need to find a broker that allows you to trade for free. Both M1 Finance and Robinhood are potential options. Robinhood is no-frills, but free. M1 Finance is closer to full-service, but doesn't have all the options of a major broker does.
All pricing data was obtained from a published web site as of 02/18/2019 and is believed to be accurate, but is not guaranteed. The StockBrokers.com staff is constantly working with its online broker representatives to obtain the latest pricing data. If you believe any data listed above is inaccurate, please contact us using the link at the bottom of this page. For stock trade rates, advertised pricing is for a standard order size of 500 shares of stock priced at $30 per share. For options orders, an options regulatory fee per contract may apply.
Typically sold as mutual funds or exchange-traded funds, these combine a number of stocks in one fund that is designed to mimic the returns of the Standard & Poor's 500 index, Russell 2000 or another stock market index. Each index tracks a section of the stock market. For instance, the Nasdaq composite tracks technology firms, while the Russell 2000 includes smaller businesses.
Figuring out how to invest in stocks starts with learning the fundamentals of investing. Once you are comfortable with how investing works, the next step is to choose the companies you wish to buy. This is the step that can make or break you as an investor, and we will cover later how you can go about choosing companies that will bring you success.
The capital gains tax rate favors long-term investments. An investor who buys and sells their stocks within a few months will face a higher capital gains tax rate (25 percent) on their profits than an investor who buys and holds their stocks for a full year (15 percent). The larger your investment, the bigger the difference. Granted, there’s a risk to holding an investment for longer, but if you’re close to that one-year cutoff, it might be worth it to sit tight for a few more weeks. INVESTING IN STOCKS FOR BEGINNERS - THE INTELLIGENT INVESTOR BY BENJAMIN GRAHAM ANIMATED BOOK REVIEW