How To Get Started Investing In Stock Market

Getting Started

A colleague at work who is interested in learning about how to invest in stocks posed the question basically of where do you start learning what you need to know.  That got me thinking to write a little on this subject and how best I can recall how I learned how to invest in the stock market.  I think I have learned the basics on how to invest in the stock market, but are there things I don't know, absolutely.  I'll be the first to tell you, but what I don't know I try to find out through reading up on the subject to broaden my knowledge and experience.   

When learning how to do anything, you must study and then apply what you learned in order to understand and gain experience.  This is what I did to get started and my curiosity leads me to this day to learn more on this subject one chunk at a time.  One thing I don't want you to think is that investing in the stock market is beyond your comprehension because it simply isn't.  Investing in the stock market is easy, but the part, less often talked about, which is hard is mastering your psychology during market turbulence after your investments have been made.

What Is Your Market Psychology?

When you get started in investing there is all the theory side to the equation, but after the theory, the crux of the matter is how are you going to behave psychologically when your real money is on the line and there is this great risk of loss?  Will what you have learned get you through?  This is what I think separates those who speculate from those that invest.  So psychology plays a major part in investing in the stock market and you really won't know what yours is until you choose a stock(s), ETF, or index fund in equity that your money is in and see what your reactions are to market fluctuations surrounding that equity.  Are you inclinations to sell at every downturn or do you look for opportunities in a downturn.

I think anyone interested in investing in the stock market at some point should be an active manager of their own portfolio for some period of time,  because if you are not gaining experience through applying what you've learned and in your psychology to market fluctuations and how you should best manage, you are doing yourself a great disservice because a financial advisor will not be able to save you when you insist on selling your portfolio when you lack sufficient knowledge and experience because your only barometer is is my money going up. 

Identifying Value

At first, I was much more drawn to understanding real estate than stocks, but I think you start to gain a skill set of assessing value and identifying undervalued assets in general that parallels in both asset classes.  So through real estate investing I learned a skill that carried over to investing in the stock market.  It is funny, but if average people were to take the psychology of when they shop for retail they look for sales and discounts and apply that to the stock market they would win all day.  You essentially know what the retail price usually is, when you are getting a deal on the brands you buy.  That is mostly what investing is about when you can buy brands you like on sale as that is when you feel you get the most return on your money.  However, the reverse is often true in stock investing that people want to buy stocks that are high and when they potentially fall in value, instead of recognizing it as a sale or discount, they avoid it.  

Study the Best

The other part of my getting started in investing in the stock market was by reading books written on or by those notable names in investing.  With that said, you will probably come across names like Warren Buffet, Peter Lynch, George Soros, Benjamin Graham, John Bogle, William O'Neil, John Templeton, and on and on.  You read what some of these big names experience is on investing and you kind of go from there on a journey that your interest alone will take you on.  They might touch on themes you will want to research more that will hopefully broaden your understanding of how they approached investing in the stock market.  The journey will be very unique to you.  Then from it, you kind of develop your own style through your experience in actually putting money out there based upon your conviction through research and your understanding at the time.  

You can understand why reading those who are considered the best is good sound advice, but no one book alone can sum it up, you have to start your own story and whether you decide to stay active, passive, or both, your journey alone will have brought you to that point.  Take Warren Buffet for example, who learned under the tutelage of a Benjamin Graham, who is known as the "Father of Value Investing", Buffet took what he learned from Graham in addition to adding his own style and philosophy and has gone on to become arguably the best investor ever.

Develop & Have Confidence In Your Own Style

My initial influences were more towards a value investor, but as of late, I am a little more growth tilted as well.  Initially I had a tilt towards primarily investing index funds, but I am also comfortable with individual stocks.  You will grow and understand best over time what kind of an investor you are, but at the start you might find yourself trying to emulate some of the best.  It is certainly nothing wrong with that, but you will hopefully find your own niche and temperament.

The library is a great source to get reading materials on some of the names I have listed above that greatly helped me get started and think about how to be an investor in the stock market.  That span from now to then has lead me to be able to manage my own 401K, choose equities and themes to be invested in, learn to leverage options trading, and of course master my market psychology.

In Closing

How to get started investing in the stock market all stem from an interest which my colleague and you may have and if you start from there and study the terminology, read about those who have done investing well and try to apply those lessons learned in the here and now stock market, learn about your own market psychology, and from there develop your own style, you will have the core of what it takes to invest in the stock market and the vehicle, so notably chosen, which is to give you a comfortable retirement won't feel foreign to you at all.