Playing the stock market is one part of an investment strategy that gives you a sense of having some control over your money. Keep some money in an interest-bearing savings account and invest another portion of your money in the stock market. Give yourself time to understand the basics of investing and save the more complicated features of brokerage accounts, including buying on margin, for when you are more comfortable with stock market investing.
Figure out your goals for investing. Ask yourself how much risk you want to take with your money and how much you are willing to or can afford to lose. A broker or an online quiz can help determine your investment style.
Determine a percentage of your budget set aside for savings you can afford to invest. If you do not see any extra money, dig deeper into your expenses and cut back on extras. Cutting back on daily coffeehouse beverages and eating lunch out every day can free up an extra $20 to $50 a week to invest.
Research companies with familiar names using the business section of the newspaper or a stock market research website. Start with your favorite brands, for example. Look up the company by name if you do not know the stock symbol. (See Resources.)
Pick a stock that pays dividends, and include that company in your portfolio. Utility companies, including electric power, natural gas and telecommunications companies, frequently pay dividends. Set the dividends to automatically reinvest so you can build your portfolio steadily.
Create a pretend portfolio on a free stock portfolio tracking website. (See Resources.) The portfolio will enable you to pick stocks and track them over time. It will also help you become familiar with common stock market fluctuations and with stock market charts.
Compare online stock brokerage companies and local stock brokerages to find a plan that matches your investment needs. Consider the amount of the minimum investment, the fee for purchasing and selling stocks, available research tools, and if you can buy and sell online, on the phone or in person.
Make your initial investment in one or two stocks or spread out your available funds over four or five different stocks. Use an online brokerage, a direct purchase plan or a company that allows you to buy partial stocks without a minimum investment. (See Resources.)
Evaluate your portfolio periodically. How often you check it may depend on how well you can emotionally handle gains and losses over the short term. Purchase more shares of stocks you like, or invest in new stocks to build your portfolio.
- Do not sell a stock because its price has decreased; wait for it go back up to your purchase price.