Stock trading is a method of investing that pursues short-term profits rather than long-term gains. This makes it risky to jump in without proper education and information. That’s why we had Schaeffer’s Investment Research review a few of their best tips for the beginner stock trader.
1. Open a Brokerage Account Suggests Schaeffer’s Investment Research Review
The first step any new stock trader has to take is opening a brokerage account. “A brokerage account is designed to hold investments. It’s usually opened with an investment firm, not a bank. Unlike bank accounts, brokerage accounts give the holder access to a wide variety of investments – bonds, stocks, mutual funds,” says Schaeffer’s Investment Research review. Brokerage accounts are sometimes called “taxable accounts,” because any investment income in the brokerage account is taxed by the government as a “capital gain.” “It’s very easy to open a brokerage account,” says Schaeffer’s Investment Research review. “And opening one doesn’t mean you’re investing. It just gives you the option once you’re ready.”
2. Set a Stock Trading Budget Says Schaeffer’s Investment Research Review
According to Schaeffer’s Investment Research review, even if you discover a hidden talent for stock trading, you should never allocate more than ten percent of your financial portfolio to individual stocks. It’s a volatile market, and you don’t want to expose all of your savings to that level of risk. “You should also consider only investing the amount of money you’re willing to – or can afford to – lose,” warns Schaeffer’s Investment Research Review. “And never use savings earmarked for upcoming and necessary expenses like tuition or a down payment on a house.” They also recommend that you decrease the amount of money you’re willing to spend in direct correlation to whether or not you have an emergency fund and ten to fifteen percent of your income going towards retirement. “In other words,” says Schaeffer’s Investment Research review, “you need to be in a good financial position before you start trading. This is not a retirement plan.”
3. Pick One Trading Market to Start Says Schaeffer’s Investment Research Review
Every market offers the potential for profit. Often, choosing the right one for you depends on how much capital you need starting out. “There are different strategies for each market, so don’t try to master them all at once,” advises Schaeffer’s Investment Research Review. Playing all the markets at once will divide your attention as well as your money. It’s best to focus your learning on just one market at a time. Just like learning a new language, once you learn how to profit in one market, it’s easier to adapt to the others. There are three options to consider upfront – the foreign exchange market, futures markets, and day trading stocks. The foreign exchange market requires as little as $50 to get started, while trading futures is about a $1,000 entry point. Day trading stocks requires at least $25 thousand, so tread carefully. To learn more about the different types of markets, talk to an investment research specialist.