Learning to invest money wisely

This post may contain affiliate links. Please read my disclosure page for more info. This is a situation many face and use to put off investing. I heard the question during my time in the online brokerage industry and hear it regularly today.

However, I have come to realize that knowing how to invest in stocks is not really difficult, per se, but it does require a little bit of homework. The primary problem I see with many investors is a lack of comfort. A Random Walk has been around for over 40 years and is considered by many to be the source to go to for investing education. Malkiel breaks down many complex investing strategies and philosophies simply so that anyone can understand them.

Buffett, as well, has a good style and talks in a way that makes investing easier for many to understand. As someone who likes to be frugal, I am always mindful of fees. You simply tell them your goals and they make a portfolio based on your specific situation. If education is the primary problem of many retail investors, then knowing what stocks to invest in comes in as a close second.

I assume that the two sort of go hand in hand, but I spoke with investors on a daily basis who did not know what stocks to invest in. This is actually a very simple problem to solve, relatively speaking. Buffett argues that we should buy what we know and I could not agree more.

Explore your house and examine your daily habits and you will find that many of the products you buy are made by generally very solid companies who have been around for decades.

Beyond that, many of those companies are likely strong dividend paying stocks which means they give money back to you, usually quarterly, for owning their stock. If you find yourself wanting to know how to invest in stocks, this is likely one of the easiest ways to determine which ones to invest in.

3 Virtual Stock Market Games That Help You Learn How To Invest

Instead of trying to time the market, or deal with the headache of determining what individual stocks to invest in, invest in index funds. They allow you, generally, to go with the market and not waste time and energy trying to beat it. If you do go this route, just make sure you are not paying more in fees than you ought be. One of my favorite, and free tools, to do this is Morningstar. Whatever your goal is, you want to make sure you stay on top of it.

Make sure that you check on your investments on a regular basis, whether that be monthly, quarterly or some other interval.

Find what works best for you and do it religiously. One of the greatest investing mistakes I saw many investors make was to invest in a certain stock or mutual fund only to then ignore it for years. This can be done relatively simply through using a service like Personal Capital which allows you to keep track of all your investment accounts in one place in addition to a free portfolio review. I personally use Personal Capital as they provide a great way to stay on top of my finances for free while also making sure my investments are doing as they should.

This can be done through Peer to Peer Lending with Lending Club. Are you looking for ways of how to invest in stocks? If not, how did you get started in investing? Would you ever consider Peer to Peer Lending as an investment option? I personally use Motif as they offer a great way to get started as well as allowing for instant diversification, not to mention promotions when you open a new account with them.

Open a Motif Investing account and start investing today! I found the best way I learned was by asking others who were in the market and by having practice runs with pretend shares in an excel spreadsheet.

I did pretend investing for about months before I entered with real money. These are great tips. I also have practiced by doing those little stock picking games and I feel like they have taught me quite a bit about investing. I trading for about 6 to a year on paper before I actually started investing. At one point it was great because it made me understand the concept of what if I lost the money…could I stand the pain and did I have the emotions for the up and down.

Be sure to take profits with the gains. Good investing is really simple. Not always easy, but simple. I will say that there are ways to get access to many of the best index funds out there without any trading fees, namely by investing directly with someone like Vanguard. And whatever your strategy, accurately track your performance and compare it, including costs and taxes, to a relevant benchmark.

I agree, solid investing really can be simple and I am actually planning a post on that topic. Thanks for the tips! No doubt education in investing is important, I think the real challenge comes in facing the emotions in the investing world.

Experience is one integral aspect in determining success as well. Not a problem Janice! I agree, facing those emotions is vital and learning to not let them control your investing decisions.

Investing in the stock market is something that is definitely underutilized as a way of building wealth.

I have learned all I know about investing from blogs! Zvi Bodie and Rachelle Taqqu. I track some stocks, particularly health insurance and health-related stocks on a fairly frequent basis. It really is DC. There are many ways to determine what stocks are out there, you just have to know where to look. I always liked the concept of buying what you know.

I could not agree more Kim. I know that we hold a stock or two of things we use nearly every day. I know some schools will do a stock picking game.

I know I did in my school, but it lasted a week or two and was basically a game to pick the stocks you know…so many were investing in DIS or KO — mind you not bad stocks at all. I would like to see a little more in terms of basics though as texas association of realtors earnest money contract to just picking a stock or two.

Investing was a little scary when I first started, but there are so many resources online to help you learn more. If you take the time, you can get a wealth of knowledge. I agree with you about not getting bamboozled with online brokerages.

Only pay for what you need. It was for me as well Grayson and I think it is for many. These are all great putty launch command line. As someone who will begin investing within the next year, I will take these stock market closed on memorial day and try to apply them to my own portfolio.

I think the biggest thing is to have a long-term investing plan and stick to it regardless of whether the market is increasing or decreasing. Having that long term view is vital, as well as separating your emotions from the investing. This is one of my weakest areas when it comes to personal finance.

I think it is for many Tonya which I think largely goes back to not knowing where to start. I started with conservative mutual funds. Then I bought stocks and sold covered calls. I have started doing more this year with straddles and spreads. I want to do more of it, I just lack the time to actively manage it. John, looks like we were on the same page today as I wrote about a similar topic in staying educated about the market.

I really like that you are pointing out the goal is to stay with the market not beat it. I learning to invest money wisely that is a much better way to gauge how your investments are doing and people that promise more are likely not being genuine.

Yes, I was thinking that as I read your post Greg. I was extremely hesitant to invest. Then I created a mock portfolio and invested to get my feet wet. I never pick individual stock even now. I stick to index funds, but not my portfolio is much more diversified.

You have to go with what works for exchange rate us dollar mexican peso history and having that diversification you have is key. Starting with index fund is a great idea. You can always diversify more later.

That can be a great way to get your feet wet and stay with the market. I think the piece that a lot of people miss is that no matter how much you learning to invest money wisely yourself beforehand, eventually you just have to jump in and start doing it. When I started investing, I read a lot on investing. I think a lot of that goes back to determining how much risk you want to take on and being comfortable with the idea of losing money.

Education goes a long ways in helping you make informed and not emotional decisions. Yes, I saw people make emotional decisions all the time and I just wanted to shake them half the time.

In forex it is free but then you have the spread indian famous stock broker buy and sell, about 0. There are a few places that can beat it, but they usually do not offer a lot of value for their price. I would recommend deciding at the outset if you want to be an investor long term or a trader short term.

Both have very different goals, strategies, and risks associated with them. Barclays stockbrokers address change would also advise everyone regardless of whether they favor a long or short term holding period to write up an investment plan that spells out the conditions under which they will consider buying or selling a stock.

Those are all great points MFIJ, especially the investor vs. I have written on several of your other points exclusively in previous posts. I found the best way to learn about investing is to lose a lot of money haha.

15 Ways To Invest Small Amounts Of Money (and turn it into a large amount of money) - Good Financial Cents

Everyone thinks their a great investor during a bull market but their feelings may change when every stock they pick is losing money. If you are not totally comfortable with investing then mutual funds are the way to go. The fund managers do all of the work for you. You just need to pick out the good performers and make sure they don;t charge high fees. That is definitely a good possibility of a way to go. Thanks for the starter information! It really does start with education.

I completely agree Sydney. Did you write this one for me? Rick and I have been seriously contemplating starting in stock investing, and this was just the info I needed to learn how to start.

I appreciate that as I was wanting it to be more personal since investing can be so dry for many. Glad to be of help. My investing journey started when I got married.

My wife came into our marriage with a small mutual fund account that was set up for her by her grandmother. Cool I thought…I get the girl and the money!

It sounds like I need to get A Random Walk Down Wallstreet out of the library. Now I understand what risk tolerance I can stand. I could not recommend it enough Ross. Bookmarked for future reference. You mentioned that this post is going to be part of a series. Are the other posts up? If you have time, I recommend to add links of the series to the end of each post. Your site can get stickier by prospective stock enthusiasts like me! Yes I did… I have to get back to that.

Great suggestion on linking to the series at the end of each respective post. Came across an article last week, talking about how Charles Schwab started and the advice he gave to his daughter was to just stay diversified and to participate in the market. Nice and simple, enjoyed the post. I have a ton of outstanding debt from undergrad and medical school that I am now starting to pay off.

Would it be a good idea to pay this off first before I invest, or would you recommend I invest after practicing and reading a few financial books mentioned, etc. Sorry to hear that Meghan. That being said, do you have access to a k through work?

Hi John Just wanted to let you know that I have opened an account with Motif and Loyal3. Ive allowed my fears for years control me so i stayedaway from learning more about money n finances. Ive bought stock using Loyal3 n im in the process of funding my Motif to stay buying shares through them.

Thanks For clear and easy way to understand you about Investing and Finances. I think another crucial aspect to stress about learning to invest is that this is a learned skill like any other.

No different than cooking, or skiing, or building a home. People should expect to feel nervous and a little freaked out at first. The key move is to start investing as soon as possible with smaller sums. That way people can get experience through full market cycles early in their investing career—and learn the importance of psychology to becoming a successful investor.

I just discovered your site for the first time today and am looking forward to exploring it more. Your email address will not be published. Notify me of followup comments via e-mail. You can also subscribe without commenting. As a veteran of the financial services industry, I've seen a lack of basic investing knowledge destroy too many retirement accounts and financial futures.

In Frugal Rules, I've created an online community where together, we gain the knowledge we need to invest confidently. Educate yourself with my honest reviews of online brokerages. I'm a Dad, husband, and veteran of the financial services industry committed to teaching the next generation how to manage money wisely. In accordance with FTC guidelines, Frugal Rules would like to disclose that it has financial arrangements with some of the entities mentioned herein.

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How to Invest in Stocks When You Do Not Know Where to Start Posted on January 8, by John Schmoll in Investing. If you enjoyed this post, please consider subscribing to the RSS feed.

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally.

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