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Stock Market Investment Basics

The stock market isn’t some exclusive club reserved for men in suits with bottomless pocketbooks. With a bit of clever research, a healthy attitude toward risk and a willingness to learn, anyone can benefit from the stock market.

The key to getting started in the stock market is to learn the lingo and start with the basics. If you’ve ever wondered exactly how to buy shares in the stock market, check out Interactive Investor, and read our step-by-step guide:

Ask the experts

If you’re new to trading, no amount of reading and research can substitute the advice of a seasoned expert. It’s always a good idea to seek the ad vice of a financial adviser or qualified accountant. If you happen to know someone who has had success in the stock market, ask for their advice, as well as the contact details of their financial adviser.

Decide what to buy

Consider what exactly you’d like to invest in. Whilst many stock market novices initially want to invest in a single company that they predict will grow in value, a fund can be a safer, more rewarding option. A fund – which contains shares of several companies – is a good way of avoiding putting all of your eggs in one basket (and therefore minimising your risk). Other investment options include bonds, futures, real estate and FOREX.

Find a broker you trust

Work with a stockbroker or brokerage firm that you trust or, if trading online, create an online account with a reputable online broker (many of which also have off-line counterparts). Choose either a full-service broker, someone who offers investment advice and provides reports on the progress of your portfolio, or choose a discount broker, someone who merely executes trade orders. Choose the latter option only if you’re confident in your ability to spot investment opportunity and take advantage of market trends.

Do your research

Even if you decide to use a full-service broker, the decision to buy and sell ultimately lies with you. No matter how much you trust your broker and financial adviser, it’s never a good idea to remain completely in the dark. Particularly if you decide to invest in a single company, it pays to do your research first. Get to know the company’s business model. Read-up on its CEO and board members. Try to spot potential areas of weakness and only invest if you’re confident that the company will succeed.

Maintain your liquid assets

If you’re using the stock market as an opportunity to gradually grow your assets – potentially as part of a retirement plan – it’s still wise to hold on to some of your liquid assets. The National Federation of Independent Business recommends that business owners keep 25% of their savings as cash in a savings account. Economists like Suze Orman recommend that individuals and families keep enough savings to cover at least eight months of income-less living expenses.