First check Sion's thread for definitions on basic financial securities you can purchase for investing
this thread will explain how investing actually happens and I will also post another thread on advanced definitions of securities that you can invest in
Research these terms to understand what is happening in this thread: stocks(equities), bonds(debentures), options, mutual funds, exchange-traded funds(ETFs), foreign exchange (forex), commodities
How the average person invests into the stock market:
1. Find a brokerage - A brokerage is any financial institution that has brokers registered and qualified to sell securities. All brokers are registered with the exchange they work for and also the Securities Commission for your state. This is good to know if you go to smaller institutions with private brokers that will charge smaller fees for their services. You can look up whether they are in good standing with the exchange before you take a chance on giving them your hard earned money.
Your safest bet is to go to a firm like the big banks (Bank of America, Wells Fargo/Wachovia, Charles Schwab). The only downside is these firms may charge more than others. Also certain brokerages only sell so many different products. So if you are just checking for stocks and bonds, a standard everything in one bank like BoA is good enough. But if you are buying options and specialized products, you may have to go to smaller firms or a bank like Charles Schwab. The tradeoff is: fees vs. specialized advice vs. the products you can buy.
2. Open a brokerage account - This can usually be done online at major banks. It's no different than opening a checking account. The only thing that you may also consider is whether you want to hold investments in your 401K or IRA. This changes the types of investments you can buy through your brokerage account, I can explain more details if asked.
3. Pick your investments based on your short and long term goals - The key is to have a plan, because there is a small difference between investing and gambling LOL. Buying a security without doing your homework is always a gamble. Figure out how much you are going to put in and what exactly you are trying to do.
4. Make an exit plan - the best investors know when to put in money, and when to take it out. Consider capital gains taxes and losses. This is why a financial advisor should be considered when investing for the first time because it is a lot of info to consider. A finance head like me loves to follow the money and analyze the money trail. But the average person might see it as a bore more than a hobby. Consider taking the advice of a professional so you can be aware of any investment decisions that might affect your tax liabilities.
5. Finally, take ya money and put it to work - at this point you will actually buy the securities you are investing in. My next post I will explain what happens when you buy a stock
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