Despite its periodic ups and downs, the stock market can be an excellent place to invest for long term goals like retirement or the education of your children. The key is to ignore the short term swings and focus on those long term goals. And no matter what your investment goals, you need to choose suitable investment vehicles to help you get there.
Pick up a couple of quality financial publications like the Wall Street Journal, Investors Business Daily or Barrons. These publications provide information on stock prices, as well as informative articles about many different companies. You can purchase individual shares of stock in companies by opening an account at a local broker or choose from the many online brokers, enabling you to buy stock from your home computer.
Budget about how much of your portfolio you want to commit to the stock market. Keep in mind that stocks are a long-term investment, so you should not invest any money you expect to need within the next five years. This will allow you to ride out any bear markets that may come your way, without being forced to sell at the bottom.
Contact several quality mutual fund families and ask for information on their mutual funds and index funds. Index funds are an excellent way to get started with stock market investing, since they purchase shares of a group of companies. This spreads your risk and eliminates the chance that the fund you choose will under-perform the market.
Complete the application from the mutual fund company. Be sure to provide all of the information required, including your name, your mailing address and your Social Security Number. The mutual fund company will report the earnings on your funds to the IRS, so your Social Security Number or Taxpayer ID is required.
Mail the completed application, along with your initial deposit, to the address listed on the application. Be aware that many mutual fund companies provide a separate address for overnight mail, so be sure you are sending your payment and application to the right address.
Consider setting up a monthly investment by having money withdrawn from your bank account and invested in a stock mutual fund. This is an excellent way to force yourself to save, and those periodic investments are a great way to smooth out the bumps of stock market investing. With this approach, known as dollar cost averaging, you automatically buy more shares when prices are low and fewer when prices are high. These automatic investments can be set up by contacting the mutual fund family directly.
While the stock market offers the chance to make a better return on your investment than savings accounts, certificates of deposit and other investment products, there is a higher risk of losing your principal.
Things You'll Need
Mutual fund account