How to Get Started Investing in Stocks

While it's relatively easy to invest your money in stocks, it's considerably more difficult to choose the stocks that can earn you the most money. When you purchase stock in a company, you purchase a portion of that company--as the company does well and earns money, your investment grows, but if the company does poorly, you can lose money on the investment. When choosing stocks, you need to do your research and diversify to minimize risk.

Open an account with a stock brokerage firm. This will allow you to buy and sell shares of stock. A full-service brokerage firm will manage your money for you by researching companies and choosing investments. This service comes with a price. A discount brokerage gives you more control over your investment. It's less expensive, but you don't have financial experts managing your account. Popular discount brokerages include ShareBuilder and eTrade.

Research companies that interest you. Look at the past performance of a company to determine whether it seems to be making or losing money. Take into consideration upcoming product launches, which could increase the stock price. This is a difficult process and is where a lot of people screw up. You can stick with well-known companies, but the stock prices if often quite high. A good way to do this is to get suggestions from a software that analyzes the stock market.

Purchase stocks through your account. Most accounts allow you to do this online. You simply transfer money from your bank account to your investment account and use that money to purchase the stocks that you choose. You can also set up an automatic investment plans, so that every month, you invest a certain amount of money.

Diversify your investments. When you purchase stocks from a number of companies, rather than just one, you minimize the chance of losing your money--hopefully, if one stock performs poorly, the others will counter that by performing well.

Monitor your investments. The best way to make money in the stock market is to leave your money there long-term. This gives it a chance to ride out small ups and downs for an overall increase in value. However, you should look at the performance of your accounts every few months. If there is a stock that is consistently underperforming, you'll want to replace it with a better option.

• Before you invest real money in the stock market, you can use a market simulation program. This gives you virtual dollars to invest and you can see how your investments do over time.
• Mutual funds are a good investment for beginners. They are groups of stocks and purchasing one share of a mutual fund gives you instant diversification.
• Penny stocks are cheap stocks with a big potential for growth. Imagine if you had gotten into some of the big name companies now when their stock prices were low.