For illustration purposes, lets assume I have just invited you over for dinner. Assuming you accepted the invitation, one of the first questions your would ask is “How do I get there? “ The same applies to beginner investors. Every investor was at one time a beginner investor. The investors who reach the finish line with a nest egg had a plan to get there.

Lets get back to dinner. I live in Florida. You live in California. That would not provide enough information for your arrival. You have a starting place and a destination, but what about the plan to get to dinner? You would need to know specifics. The same applies to investing. You would prepare for the journey, chart a course and arrive safely in Florida as you would with your investment goals.
The same principle applies to beginner stock market investing. Lets assume you have $10,000.00 to invest right now. So how do you prepare?

Understand How The Stock Market Works

Individual investors should start right here. What makes a stock price move? Hint: it is not individual investors. Institutional investors, such as mutual funds, and banks, move stock prices up and down. Simple supply and demand I the order of the day. Institutions make a living buying and selling stocks. Following along with how institutions trade is a good place to start. Understand your 1000 shares of XYZ are not going to move the stock price.

Defining Yourself as An Investor

My personal stop loss point is 6%. Why is that? Because I do not like the way it feels losing 10% or even 7%. This is a hard and fast rule for me. I remember following a stock once down to a 20% loss thinking all the while it would come back. It did not. The point is I know myself, and I know my rules. They are non-negotiable factors for me with investing in the stock market.

Where Are You Now As an Investor?

Every journey begins with a starting point. Every journey has a destination point. Everything you do in between will either define your success or document your failure. Set your goals; practice your strategy with paper trading stocks. Set aside capital for short term investing. Plan to include long-term investments. Open a money market account for safely keeping your cash. If you want to trade options, first learn how to trade options . Determine your plan and then work your plan. Dinner is at 6

When considering how much you should invest, one of the first questions you should ask yourself is how much can I afford to invest.  In your deliberations, you should consider factors we have discussed previously, like your current financial situation.

Are you making payments on high interest credit cards or other debts?  Do you have enough money to sustain you for at least three months should you meet with some unforeseen misfortune like a sudden medical illness or finding yourself unemployed?  Do you have a home or other responsibilities that may require some unexpected out of pocket expenses?  These are all things to take into consideration when you set out to determine how much you should to invest

Many first time investors or beginner investors often want to begin by investing their entire savings.  Although for some this may be an option and if it’s true for you, great!  However, you should consider your entire financial situation and keep your investments strategy in line with your long range financial goals.  Think about what your savings was originally for.  This may prompt you to reconsider a full investment from long standing savings.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have income or funds from another source, such as an inheritance, this will quite likely be all that you have available to invest.

Next, determine how much you will be able to add to your future investments. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time. Most employers offer 401K plans and other savings plans to assist their employees with meeting their financial goals for retirement.  You can also speak with a qualified financial planner who can assist you in setting up a budget and help you determine how much of your future income you should invest to meet your financial goals.

With the educated and knowledgeable assistance of a financial planner, you can be sure that you are not investing more than you can afford – or less than you should in order to achieve your specific investment goals.

As with many types of investments, you can be assured that a certain initial investment will be required.  Research the investments you plan to make and be armed with all the information you can obtain prior to investing your money.  If you don’t have the required initial investment amount, you may need to look for other investment options like best cd rates.  Beginning investors should never borrow money to invest.