investing in stock market for beginners

Invest in Stock Market like a pro

No one can become a millionaire just by earning money.
We need to invest money to make more money.

As soon as we save some money we need to start investing. I covered some of the investment ideas as you start saving money. 

Read this post if you haven’t -> How to invest money?

The most popular investment idea is to invest in stock market. 

The stock market can be risky because of its volatility. However, it is one of the mature industry so there are many experts and tools that can help you to succeed.

There are many ways to invest in stocks market. We will look into those methods in this post.

To get started you need to sign up for a trading account. You need this account to perform any kind of trading in stock market.

I recommend Robinhood, it is free and great for trading. They don’t even charge you for executing each trade. 

After signing up, start moving funds into this account. It is a good idea to hold some funds in this account so when a good opportunity comes you can quickly buy stocks. 

It usually takes few days for the cash to get deposited in robinhood. 

Buying Stocks for long-term

This is the most common way of entering into the stock market. 

You hear about a company from news or friends that that company is going to grow.
You immediately buy their stocks so that you can sell them for a higher price later.

But often you see the stock perform better in a short term and fades away after a while. 

This is because the performance of the stock is related to the industry. For example, Oil was popular at some point and now it is not.
If you had bought oil company stock 10 years back now you probably would have lost some investment.

On the other hand, it can be a good long-term investment if you pick the right stock.
For example, if you had bought Apple or Amazon stock 10 years back you could be enjoying the massive gains it has got in these years irrespective of the sector performance.

Looking at all these stocks growths, it might be tempting to jump into the stock market.
But you need to make sure you do the technical analysis on a company before buying their stock.

Understand the core strengths of the company and the sector it belongs is very important. This will help you determine when to enter in and exit the stock based on the market conditions. 

Look at the below chart, there was never a sector did perform consistently. It always went up and down. 

Stock market trends

So make sure you are picking the company that is diversified and can still show good results irrespective of the fluctuations. 

Rather than spending months of analysis. I use the expert service to recommend the right stock for me. 

Motley Fool is a service which provides this recommendation and they have been doing it for a long time.
It helps a lot when you know you are not alone and confident that you are not making a bad investment.

Click here to go to Motley Fool

I definitely recommend to check it out. Because it is smart to leverage the experts rather than trying to figure out everything on your own.

Day Trading

As you start following the stock market, you will start identifying the trends and patterns that each stock follow. 

When there is a news about a company the stock moves up or down based on the nature of the news.

The stocks also react to the earnings results and company performance announcements.

These swing in the stock can be leveraged for short-term trading. If the stock moves up 5% in a day, you could even buy a stock in the morning and sell it in the evening. 

This is call day trading.
When you buy and sell stocks on the same day. It is less risky and could earn more money if you pick the right stocks.

Swing Options Trading

In day trading you need to buy stocks which could be expensive. 

Many good company stocks are few hundred or even thousands of dollars. For some of us, it could be hard to get in and invest so much. 

This could be a missed opportunity especially when we know the stock is definitely going to go up. 

For those investors there is a trading option. Called derivative trading. 

Usually called options trading. This is basically a type of betting on the stock.

Let’s say you are thinking that Apple stock will go up by 10% in 2 weeks. You will go and buy a contract for that particular bet at the option price. 

These price are usually way lower and requires less investment to get in. 

If the price keeps going up this option contract price also grows exponentially. So you could easily sell the contract as it grows to some percentage and make profit. 

The caveat is, if the stock price retracts the option price falls exponentially too.
You could lose all your investment if you picked a bad contract or some external entity influenced the stock price before you sell it.

apple stock option

The risk-reward is really high in this trading method, if you pick the right option call you could easily make 100%+ returns in a few hours.

Unfortunately, in order to pick such a good option, there is a lot of research needed.
You need to track every move and decide to sell or buy more.

It is hard and there is a lot of emotions involved. Many people who start in this trading get emotional, scared and make hasty decisions. Resulting in losing their investment. 

Even here, I leverage the experts to help me take the calls.
Guys like Jason Bond who has a good reputation in the industry is someone I use to pick the calls for me.

The swing trading option is a daily alerting service that gives you option calls to enter and exit. 

Keep in mind not all options would be good but most of them will be. When you average your profit and loss monthly, you will end up being highly profitable. 

As of today on an average, my portfolio grows 10% almost every day.
Don’t take my word, just try it for yourself and decide.

Short Trading on Earnings

Similar to the swing trading, you can trade options during the earnings announcement. 

Every company announces their result every quarter.
When a company announces the result the stock price either moves up or down significantly.

When the stock moves the options also moves exponentially. This gives us a great opportunity to pick an option and make some significant income. 

The good news is you can either bet on the stock to go up or go down based on companies performance.
Either ways you could make money, which is not available if you buy stocks. You can make money only when the stock goes up. 

But these are an extremely risky investment because the volatility is high and since it is short term.
If you pick a bad call you could lose all the investment. 

On the positive side if you picked the right call you could double or triple your investment in a day or so.

Index funds

Index funds are similar to mutual funds that track a certain market index.
It is one of the safest investment options, that is almost guaranteed to grow in a long term.  

For example, let’s look at the S&P index. Over the period of 20 years, it has only grown.
Even after a major crash in the market and a couple of dips. 

If you have invested $1000 in 1998 it would have doubled by now, without you doing anything. 

S&P index funds

Here are the top index funds that you can look into. 

You should have this index fund in your investment portfolio as part of your retirement planning option. 

For active investing, I still recommend the main stock market investment, especially options trading. 

Penny stock trading

There are many exchanges outside the major exchanges like NASDAQ or DOW. 

In these external exchanges, few companies list their stocks for a lot less price, usually less than a dollar. 

These stocks are high risk because they lack many governance and data that are usually available in major stock exchanges. 

The stocks are highly volatile and can move quickly in either direction. 

I do not recommend this trading unless you have a chunk of money left and willing to play a high-risk game. 

There are still many people who make a good amount of money using these this method.

Are you ready to invest in the stock market?

Investing in the stock market could be a little tricky for beginners. It is hard to understand all the data and various techniques used by professionals. 

That is the reason I never try to reinvent the wheel, rather get the experts to help minimize the risk and grow my portfolio on a autopilot. 

Do let me know if you have any questions in the comments

Comments 10

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  1. Stock market seems so scary for so many people! I love your summary and I will take these things with me while I invest in the stock market.

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  2. I’ve always been intrigued by Stock Market but didn’t have the bravery to invest in something like this. This post provided a lot of information that would be useful if ever we decide one day to trek this path.

  3. I love how you broke it down. Stock market definitely isn’t that straight forward. Thanks for this informative post!

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