How to Start Investing in Stocks: 5 Steps
“How can I start investing at the age of 18? Is it possible?”
I answered this question on Quora and wanted to include it on MoneyByRamey.com as well. While the below was originally answered for someone who is just beginning in the world of investing, it applies to anyone looking to begin investing in the markets. Enjoy!
Remember that you can follow my dividend portfolio as I grow towards $50,000 in annual dividend income per year! Remember to sign up for Live Free and Div Hard to receive the latest tips and posts straight to your inbox!
Excellent question and getting started at such a young age is definitely possible! You only need to have a desire and the willingness to learn the world of investing to begin. It took me 15+ years to finalize a strategy that I find works for me. I was able to understand this over many years of reading, learning, and growing. You can help accelerate that journey by really diving into the world of investing through learning as much as you can as quickly as you can.
Here are some steps I would recommend to get started in the world of investing:
Read any investment related material that you can get your hands on.
This would include investing newspapers, books, and courses. Your goal here is to familiarize yourself with the world of investment to find a strategy that works for you. Recommend reading: Investors Business Daily and The Intelligent Investor. It is imperative that you have a solid understanding of theories, markets, terms, etc. before you begin to deploy your hard-earned capital.
Begin a ‘mock portfolio’.
While you are learning your craft, you will want to start with ‘play’ money as you hone your strategy. A mock portfolio will allow you to test your strategy by ‘buying’ stocks to see how they do over the long-term. You wouldn’t actually use any capital but rather you would create theoretical stock investments and track your progress. This is important as you do not want to risk much (if any) capital while you are beginning your foray into the world of investing. I find that FINVIZ.com – Stock Screener is a great site for generating a mock portfolio and understanding fundamentals.
Work in the investing sector.
I was fortunate enough to find a career in the world of private equity, financial trading, and commodity trading, which helped teach me a lot about investment strategy. Immerse yourself in the culture to help accelerate your learning curve. Could you work for a financial adviser for a few years? Or perhaps at a financially-oriented firm? That experience will do so much to help build up your financial acumen.
Save as much money as possible.
I would start up a ‘nest egg’ for when you are ready to invest. Keep this money in the markets while you learn your craft. You can keep capital in mutual funds, index funds, money market funds, etc. until you are ready to begin investing on your own. This will allow for your money to grow while you are learning the art of investing. Keep in mind though that markets will fluctuate. That means that any investment is subject to the risk of loss. At only 18yo, you have quite a long investing horizon, so you can handle much more market fluctuations than someone closer to retirement. Learn to see market drops as opportunities to acquire more shares, in great companies, at lower prices.
When you do feel comfortable making your first trade, start small. You do not need to invest in large increments right from the get-go. In fact, I would suggest investing in small increments, say $100–200. Now many brokerage firms offer $0 trades, so trading in smaller increments is much more realistic than before. I personally use Online Stock Trading, Investing, Online Broker and have found their services very easy to use.
Keep up the awesome work and you are already ahead of the curve by wanting to learn how to invest at such a young age. Stay patient and take your time – no need to rush into investing. If you are interested, I have penned an article on dividend investment strategy and encourage you to read it as part of your learning process. Feel free to email or DM me any time with questions and I’ll do my best to answer! Good luck and happy investing!