If the past two years of daily stock market headlines have you searching the web for “how to invest in stocks,” you’re not alone.
In fact, that very search tallies 2 billion Google results, indicating that knowing where to start in stock market investing is confusing for a staggeringly large percentage of Americans. That’s why it’s almost always a smart idea to speak with a financial advisor before making any significant investment decisions.
Let’s start with the basics of stocks: A publicly traded stock is a fundraising mechanism used by a company to raise funds in exchange for giving individual shareholders a piece of the company, or a share.
As a company’s prospects and track record rise, so does the value of the company, typically, along with your shares.
There are three general ways an individual can invest in stocks:
- Using a brokerage firm or independent advisor, who not only make recommendations but often execute trades on behalf of their clients.
- Through an employer’s 401(k) plan.
- By using one of a number of individual trading platforms to manage a stock portfolio independently.
As for selecting which stocks to trade, prepare for some serious due diligence. There are 2,800 stocks traded on the New York Stock Exchange, another 3,300 traded on the NASDAQ and thousands more traded on less familiar exchanges.
Perhaps the most widely cited stock investing advice of all is the old saying “diversify, diversify, diversify.” But diversify to what, specifically? And what is the best way to accomplish that? This is where education and good advice become crucial.
Know When to Call in the Pros
Many financial advisors are well-versed in all things stocks related.
But there are also tax considerations, account structure strategies, diversification concepts and necessary budget-setting tasks that all play a crucial role in maximizing your profits. If it sounds daunting, that’s because, realistically, it is.
The good news? Help is available. Most financial advisors are well-versed in all things stocks related. In fact, according to a 2021 Fidelity study, financial advice can add between 1.5% and 4% to account growth over extended periods.
If like many Americans, you are not sure where to start your search for a financial advisor, you should try our free financial advisor matching tool.
You’ll answer a few short questions and then be matched with up to three fiduciary financial advisors who can help you begin your journey into investing in the stock market.