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How do I Invest in Stocks?

Jeremy Laukkonen
Jeremy Laukkonen

In order to invest in stocks, you typically must enter into a fiscal relationship with a stock broker of some kind. Stock brokers were historically brick and mortar businesses that would manage your investment portfolio. You would typically provide them with a fixed amount of money to invest, after which they would either buy the stocks you requested or else make purchases and sales according to a plan to which you agreed. Internet-based stock brokers may allow you access to the tools and information you need to do much of this work yourself. When using an Internet brokerage to invest in stocks, you are typically responsible for entering your own orders, determining which type of order you want, and setting the buy or sell price you are willing to pay.

To successfully invest in stocks, it is typically suggested that you seek to obtain a diversified portfolio and take a long view on your investments. A diversified portfolio is one that contains stocks from different companies, different industries, and often various other financial instruments. Taking a long view simply means investing for the future and trusting that your diversified portfolio will increase in value over time, regardless of whether or not prices drop in the short term.

Woman with hand on her hip
Woman with hand on her hip

You may also invest in stocks on a more short-term basis, buying and selling to take profits on a daily or weekly basis. This form of stock investing is often known as day trading. It may be lucrative, though it also comes with the accompanying risks of losing large amounts of money.

If you choose to use physical brokerage firm, brokers will often work with you to manage your portfolio. These types of brokers are able to help you set up different strategies depending on whether you are looking for short-term gains with the accompanying risks or are investing for the future. On the other hand, when working with an Internet brokerage, this kind of research and planning is often up to you. These brokerages usually offer research tools and information to teach you about different investment strategies and financial investments. They will sometimes also have agents available to offer advice over the phone.

In addition to purchasing and selling individual stocks, there are also other ways to invest in stocks that may be somewhat less of a risk. One of these is the mutual fund, which is a portfolio of stocks that many people invest in together. A fund manager uses the pooled money to manage the portfolio according to a strategy you will typically agree to prior to investing. The advantage of these types of investments is that if one stock in the fund plummets, the overall value of the fund may remain steady or even increase, as other funds may be performing well.

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