Best Way To Invest Money: A Market Breakdown

Determining the best way to invest money in the stock market requires using a multi-step process to decide what to buy, how to do so and when to sell. The market can be subject to major ups and downs, so it can be important to buckle in for a ride. When the right process is followed, gains can be enjoyed and losses kept at a minimum in many cases.

Step 1 - Determine Investment Amount

Since even the best buys in the market can experience big losses on occasion, it is important to consider the amount of the initial investment. The stock market can return some amazing profits, but this is not always the case. To minimize the impacts of loss, only invest money that can be survived without if things do not go right. Once gains are experienced, they can be turned into additional purchases.

Step 2 - Decide how to Buy

The best way to invest money in the stock market will hinge a lot on personal buying and selling preference. There are two main options available to individual investors today. They are:

  • using a broker - A broker can offer advice on stock purchases, make the actual buys and put in buy orders on a client's behalf. This option can be very wise for beginners, but it does require giving up some controls.
  • day trading - Using online investment sites in place of a broker can also work very well. When more control over purchases and sales is desired, this option might fit.
Step 3 - Select the Stocks

There are many different companies that offer themselves up for stock sales. Picking the right ones to bank on and the ones to steer clear of can be a trick. There is no magic formula to make this task easier. There are some things to consider, however, when trying to decide the best way to invest money. They include:
  • stock history - If a stock has been traded for a while, look at its performance over time. Ideally, it's best to bank on stocks that have a track record for being strong. Even if they are down at present, companies that tend to perform historically are likely to rebound.
  • recent performance - Watching the recent performance of stocks can assist with making the determination of when to buy. If a good stock is slumping and showing signs of going even lower, waiting for a minor drop can make investment money go farther on the purchase.
  • news - Daily news can have huge impact on how stocks perform. If the news is bad, even solid stocks can plummet. This can present a good opportunity for buyers. Also look at news related to specific companies. Even rumors can boost stocks or make them fall in value.
Step 4 - Set the Sales Level

Once a purchase is made, it is important to determine the price at which to sell. Setting a plan and sticking with it can minimize losses. Make sure to set sales prices in a realistic range.

The best way to invest money in the stock market requires a little study and patience to see returns. The daily ups and downs can be frightening, but they are not always indicative of how stocks will perform over time. Create a buying plan and stick with it to increase chances for returns.

blog comments powered by Disqus
Scottrade