While many great tools exist for helping inexperienced investors get started, the stock market still has a very steep learning curve. To be successful investors, individuals need to devote significant time to learning about the nuances of the market and various sectors in order to make the accurate predictions that drive profits. Below are seven of the best ways to get started learning about the market today while building confidence for the future.
1. Read Books
Perhaps the most popular way of learning about the stock market remains reading books, which are inexpensive compared to classes and serve as a treasure trove of information for future reference. Individuals need to do some research about which books are the best, since some will assume a solid foundation in investing, while others may offer questionable information.
A perennial favorite among industry workers is How to Make Money in Stocks by William O’Neil. Some other great titles include The Intelligent Investor by Warren Buffett, The One-Page Financial Plan by Carl Richards, and Value Investing: From Graham to Buffett and Beyond by Bruce Greenwald, Judd Kahn, Paul Sonkin, and Michael van Biema.
2. Follow the Market
While learning about the stock market, it is critical to get acquainted with its ups and downs by following it closely. Many investors turn to websites like Google Finance and Yahoo Finance for important news, and the Wall Street Journal offers some of the most in-depth coverage available.
Each day, individuals should at least look through the headlines to get a sense of market trends as well as important economic concepts, business principles, and expert analysis. People may also want to spend some time watching CNBC each day, which offers a different perspective. With any of these sources, individuals should not get bogged down by jargon, instead focusing on the basic messages.
3. Try a Simulator
The best way to get involved in investing is to make a small, initial investment, but sometimes this is not feasible. To learn more about the market without making an actual investment, individuals can turn to a variety of online brokers that offer virtual trading.
This approach can help avoid some of the most common mistakes experienced by beginners, such as going ‘all in’ right out of the gate hoping for a big return. Usually, this strategy results in big losses because people do not have enough experience or understanding. With a simulator, people can practice proper portfolio allocation. One service that individuals may want to check out is Wall Street Survivor, a stock market simulator that has earned a lot of praise.
4. Take Classes or Complete Seminars
Some people do not absorb information easily through reading and prefer a lecture format. No shortage of classes and seminars exist for introducing people to the stock market, so it is important to do due diligence and choose the right one. Typically, seminars focus on particular aspects of the market and are great for clearing up specific misconceptions, while classes have a broader focus and serve as an introduction.
When looking at classes and seminars, people need to remain leery of false promises and investigate teachers online. Some classes can cost more than $1,000, so individuals need to be sure that they are spending their money wisely. Often, seminars are free, but they come with a sales pitch that individuals need to think about critically.
5. Set up an Account with a Stockbroker
Most online stock brokers provide a wide range of trading tools and other materials for their clients. Setting up an account can open up a whole new avenue for learning about the stock market and benefiting from the research conducted by professionals at the firm.
StockBrokers.com is a key resource for comparing online stock brokers, including the services that they provide and the fees that they charge. Individuals may also want to look for online stock brokers that provide virtual trading experiences (see number three) so that they can practice a variety of strategies.
6. Find a Mentor
People who already have experience trading can prove incredible sources of information. Mentors could include family members, professors, friends, or colleagues. Knowledgeable mentors can offer advice and guidance, point to the best resources, and offer solace when the market becomes particularly volatile. All successful investors have excellent mentors.
Those who do not have people in their lives that can serve as mentors can instead turn to online forums to learn from others. Some popular choices include Trade2Win and Elite Trader, both of which have active and informative communities. Still, novices need to be careful who they listen to after they ask a question. Most participants are not professional traders.
7. Learn from the Greats
Individuals who are serious about investing should spend time learning the perspectives and insights of the greats, such as Warren Buffett, Peter Lynch, George Soros, Jesse Livermore, and John Templeton. These individuals offer inspiration that can be helpful when people feel defeated by the market.
A great way to get some insight into these giants is by reading Market Wizards, a book by Jack Schwager that looks at the lives and philosophies of these and other traders. From there, investors can choose to learn more about the traders they find particularly appealing.