When people look at the stock market today, it is more than a little intimidating. The market is more volatile than it has been in a long time, and the psychological effects of both media and government reporting makes it even more unstable. Volatility, while scary to the new investor, is the meat and potatoes of an experienced trader. If prices don’t change, you can’t make money.
The key is finding which stocks to follow and invest in. There are many websites out there that let you invest totally on your own without the aid of a broker. Examples include Scottrade, E-Trade, and ING (Sharebuilder). They’re all competitive and I’ll let you research on your own which one suits you, but what a new investor needs is confidence, and there is a great way out there to do that.
Invest with real-time statistics with virtual money. The website that I use for this is called http://www.updown.com and they are entirely free to join. I haven’t been active much lately there but overall, I’ve done fairly well. Since November of 2008, I am up 25.6% annually. You read that right, 25.6%. That means an investment of $5000 one year ago would be at $6280 today. By contrast, a bank account MIGHT earn 2%, and the same $5000 would be at a measly $5100.
It is not without risk. Look into limit orders, which are preset orders to sell if the stock dips too far. How far is too far? That’s up to you, but a good general rule of thumb is about one third of the stocks base price, and investing this way does require you keep up with the news about the companies you have invested in. Perhaps something on the company’s horizon holds so much promise that a near term loss, due to decreased profits, will result in long-term gain, like a retooling or an acquisition of a competitor that results in a big financial hit near term on the company to secure the company later on.
Make a decision and don’t keep second-guessing yourself. Do research on the companies in question and find good places to buy in and cash out. One of my best investments was Ford Motor Company (Symbol: F). I bought in just after the auto company bailouts, when Ford was trading at about $2.00 a share. As of the time of this writing, Ford is trading at $11.21. That is a 560% increase! That isn’t typical but if you watch carefully and pick companies you reasonably think will rebound or expand (for example I have various discount retailers that are doing well for me, including Ross Stores, 99 Cent Only Stores, and YUM Brands).
Play with the free simulations and build up confidence. When you start saying to yourself, “Darn, if I had only bought X in real life, I would have made a killing!” you’re ready.