The Ultimate Guide for Beginners Investing in the Stock Market in 2022

How much money do you have in your savings account? As of last year, the average American saved $1,683, according to Bankrate. While that’s certainly better than nothing, it’s hardly enough to retire on. To get where you want to be, it’s time to learn how to invest in the stock market and watch your savings grow into something substantial. But if you’re a beginner at investing, where do you even begin?

Step 1: Establish your investment goals

There are two major reasons to invest in stocks: The money you'll earn as your investments grow, and any capital gains you make when you sell your investments. If your goals are purely financial (i.e., if you're solely looking to make more money), then it's a smart idea to establish your investment goals before buying any stocks or funds. That way, you won't spend tons of time researching companies only to realize that they don't align with your goals. For example, if investing is a hobby that helps bring you joy, then it doesn't really matter how much money you make—you just want an enjoyable experience that gives back something worthwhile to society.

Step 2: Assess your risk tolerance

When beginning to invest, it's easy to feel intimidated by complicated language and charts. The truth is, you don't need to understand everything there is to know about stocks. One of the biggest mistakes new investors make is letting their risk tolerance cloud their investing choices. Before you start picking stocks, first assess your risk tolerance. If you're nervous that every stock pick could plunge 30% at any moment, then playing with your investments probably isn't a good idea right now. Stock investing can be risky if you aren't willing to stomach temporary losses and volatility—but even safe strategies require a certain amount of fortitude and discipline if they are going to be profitable over time

Step 3: Consider how much time you want to spend on investing

When you’re first getting started, it can be tempting to dive right into investing. After all, if you want to earn money with stocks and investing, you have to invest in stocks, right? The answer is not necessarily – most people are better off initially focusing on investing with a methodical strategy that lets them assess how much time they want to spend on investment each week or month.

Step 4: Understand how compounding works

Compounding is what happens when you make interest on top of interest, or return on top of return. It's very simple, but crucial to understand if you want to grow your money at a faster rate than inflation. If you're wondering how compounding works, check out our post on it here: Compounding Explained: Why Your Investment Account Seems to Grow Faster Than You Thought. If you'd like to have that guide as a reference so you can review anytime - feel free to grab it below! Our goal with Simple Money Guy is to help people get out of debt and save more - so we're going with an affiliate-based model by recommending Betterment because they are one of our favorite tools for helping people invest.

Step 5: Choose the best investments for you

The stock market is a scary place for the inexperienced. Many investors are fearful of losing money in the stock market, because they think stocks are too risky for them. The reality is that stocks can be very safe and profitable investments for most people if you choose the right ones, but also don’t go all-in on stocks at first—most investment professionals recommend putting around 50% of your portfolio into stocks, and only put more money into stocks once you get more comfortable with investing over time. You should consider your age, your goals and other factors when choosing the best investments for you; an overall asset allocation that considers your risk tolerance and financial situation is probably best.

Step 6: Create a solid financial plan

Creating a solid financial plan is a key to beginning investing. And that doesn’t mean creating just one — you should create at least three different plans depending on your risk tolerance and goals. Remember, before making any trades, always evaluate what your financial situation is like and remember to set stop-losses before investing, if need be. You should also write down your objectives and know when to take risks vs. when not to take risks. And lastly, stay motivated. Make sure you can answer these questions as clearly as possible before beginning: How much are you saving? How much time do you have left? What stage of life are you currently in?

Step 7: Prepare yourself psychologically

The stock market can be a scary place. You’re putting your money on different companies hoping that they perform well and continue to grow, but not all of them will. While that comes with risk, remember to view it as an opportunity to learn and grow. In fact, many of today’s wealthiest people attribute some part of their success to taking risks on investments when they were just starting out. If you want to gain more knowledge about investing before diving into stocks, consider purchasing books by financial experts like Jason Kelly or Suze Orman—though keep in mind that reading alone won’t prepare you completely (more on that below). If you’re looking for one simple takeaway here, though: prepare yourself psychologically before trading your first shares.

Step 8: Start saving now!

It’s tempting to hold out until you have a nice fat pile of cash, but that’s not an ideal strategy. Start saving now! Putting just a little bit of money into your investment portfolio each month or every week is much better than waiting until your stash is big enough before opening up an account. This way, you won’t miss any opportunity to start collecting returns. A $50 deposit here and there might seem negligible at first, but it will add up over time. It also might take some time to get a full-time job if you're just starting out—so if you start early, you can still invest part-time even while holding down another gig or two (or three).

Step 9 - Monitor your investments regularly

When you're not actively trading, be sure to monitor your investments regularly. First and foremost, don't forget to take a look at how well your stocks are performing by checking your portfolio's performance against major indices such as Standard & Poor's 500 and Nasdaq Composite. The S&P 500 is perhaps one of the most followed benchmarks in the world: It includes 500 large-cap U.S. stocks that are representative of all sectors of the market, and it serves as a proxy for domestic companies regardless of their market capitalization or industry.

Step 10 - Regularly review your investment portfolio and adjust it as needed.

To improve your investment portfolio, it is important to learn about and try different investing strategies. Learning more about personal finance, how different stocks and securities perform under various conditions, and how inflation affects your investments will help you determine what type of investment is best. Always remember that investment risks do exist; however, they can be controlled by making well-informed decisions. You should regularly review your portfolio and adjust it as needed to maintain a balance between risk-taking and safety. Only invest as much money into stocks as you can afford to lose entirely.

EARNINGS DISCLAIMER:

This article is for educational and entertainment purposes only. There is no guarantee that you will earn any money using the techniques and ideas mentioned in this article . This is not financial advice. Your level of success in attaining the results claimed in this video will require hard-work, experience, and knowledge. We have taken reasonable steps to ensure that the information on this article is accurate, but we cannot represent that the website(s) mentioned in this video are free from errors. You expressly agree not to rely upon any information contained in this article .