Getting into the stock market requires the ability to make financial decisions with confidence. Ifyou’re first starting out, gainingthat confidence can seem difficult to achieve. However, withthe right tips, you can get comfortable enough to begin trading. The following are a few simplestock market strategies that will work for any beginner.
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Consider a Traditional or Roth IRA
You may have some experience with employer-sponsored investment programs, such as your 401(k). A good step beyond that for someone looking to trade more is to invest in tax-advantaged accounts. These include accounts like Roth and traditional individual retirement accounts.
With these types of accounts, you can contribute up to $5,000 per year. Each one has its different tax advantages, so research which one is the best option for you. Besides the increase in tax benefits, you’ll have more choice of investments when you choose a Roth or traditional IRA over a 401(k) plan.
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Only Invest Money That You Won’t Need for Five Years
When it comes to investing in an IRA, such as the traditional and Roth options mentioned, you can incur penalties and tax ramifications if you withdraw funds before you reach the age 59 ½. Roth IRAs do allow some early withdrawals. However, you typically cannot take out full earnings or contributions for at least five years.
While not all investments are the same, there is a good rule of thumb to stick with when you begin trading: Don’t invest cash that you’ll need back in the next five years. When you invest, patience is key; you’ll often get more rewards by waiting.
If you’re looking for investment plans with a little more leniency on early withdrawals, consider looking into a taxable brokerage account. They don’t penalize early withdrawals. However, keep in mind that you won’t be offered the same tax advantages you’d have with an IRA or employer-sponsored plan.
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Choose a Trustworthy Binary Broker
Binary options allow traders to profit from the fluctuations of prices on the global markets. While this can be a good option for many, you have to really do your research to understand the rewards and risks of these controversial financial instruments.
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Harness the Power of Passive Stock Market Strategies
As an investor, you want to build a balanced portfolio but still keep your costs down. Most investors do this by investing in index funds, exchange-traded funds, and mutual funds. By pooling multiple stocks together, rather than betting on any one company stock, they balance out the inevitable winners and losers.
These types of funds are built around passive management strategies. Instead of trying to outperform the market by frequently and actively selling and buying stocks, passive investing seeks to match wider market gains. Passive investing also incurs fewer fees that can erode investment growth in the long-term.
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Keep Active Trading to 10% of Your Portfolio
If you do want to do active investing, do your best to keep it at 10 percent or less of your total investment portfolio. If you throw too much money into one company or even a few, you’re counting on their success, which can quickly be halted by a simple regulatory issue, PR disaster, or emerging competitor. The term portfolio refers to your spread of investments.
When looking to actively trade, go with a stockbroker that offers low volume discounts or trade costs. Some brokers offer educational simulators and tools that can help you practice trading before really diving in.
The Bottom Line
Investing can seem like a high-stakes game from the outside, and it can be at times. However, it is often slow and steady. With the right moves, even you can win the investing race.