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Investing in stocks requires a lot of skills and can be daunting, especially for a beginner. However, it’s also very rewarding. The first step to invest in stocks is to know where and how to invest. Read the following methods you can use to invest in stocks.
Buying Stocks Online
Buying stocks online can be the cheapest way to invest in stocks. However, it also offers you little advice or feedback.
You are charged a flat fee or a percentage as commission from your purchase or for every transaction. The risks come from the fact that you are going to decide on your own.
Therefore, buying stocks online requires you to take time and study investing thoroughly. It’s a wise move to study the top online trading sites that you can choose from before you get started.
Investment Groups or Clubs
When you join an investment group or club, you get more information or advice but at a reasonable cost. However, it also takes a lot of time to meet with the members.
They also have various levels of expertise and you may be required to pool some of your funds into a club account before you invest. Just like buying stocks online, it’s better to research your choices first before you get started.
Full-Service Brokers
Getting a full-service broker can be very expensive since you will have to pay higher fees. On the other hand, you will acquire more information and recommendations. This protects you from the feelings of greed and fear, which are destructive emotions when trading in the market.
You can check and ask around for the best financial professional that you can trust. There are tips from the Securities and Exchange Commission that will help you select a good full-service broker.
Money Managers
Money managers are people who will select and buy the stocks for you. You pay them a fee, typically around 1 to 2 percent of your portfolio.
If the manager does his job well, this method takes the least amount of time. You will only have to meet him/her at least once a year. However, because of that same reason, you must be very wise in selecting who will manage your money.
Index Fund
Index funds are also known as exchange-traded funds, and they are considered to be safe and inexpensive if you want to profit from stocks. These funds simply track or follow the stocks in an index.
The fund rises and falls along with the index that it tracks. There is no annual fee but it’s quite impossible to outperform the market since the fund only follows the market. in spite of that, investing in index funds still remains as one of the most popular and safest way of investing.
Mutual Funds
Mutual funds are relatively safer way to profit from stocks. The fund manager will purchase a pool or group of stocks for you.
You don’t really own a stock, but you own a share of the fund. Most of these mutual funds charge an annual fee that is between 0.5 percent and 3 percent, with the goal of outperforming huge market indexes such as the NASDAQ or the S&P 500.
Hedge Funds
Hedge funds are similar to mutual funds in a way that they both pool their investors’ money in an actively managed fund. The difference is that hedge funds invest in complex financial instruments that are called derivatives. Using these instruments, hedge funds aim to outperform mutual funds with the use of high leverage.
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