How to Invest

How to Invest: Getting Started

Investing is the concept of committing capital with the anticipation of a financial return. Even though investing may include short-term stock trading or even day trading, its goal is long term; investors look for a substantial increase in their wealth over time as a reward for locking in their money.

There may be a predefined target for investing, such as paying for a child’s education or accumulating a specific sum for retirement. Or, investors may look for a minimum annual percentage rate return on their money, such as 10% or 12% APR. Even if you lack such specific objectives when you start investing, you should make a plan in order to provide a scorecard that tells you how you’re doing.

Any plan to invest your money might include a minimum reward-risk ratio that anticipates your winnings will consistently outpace your losses (and you will have losses). At Online Trading Academy we like to use a ratio of 3:1. In other words, we don’t enter a position unless our analysis tells us potential profits are three times potential losses. For example, we might buy a stock at $50 with the expectation it will rise to $65 during a defined timeframe. If it reaches that target we’ll re-evaluate and decide whether to sell or hold for further profits. Meanwhile, we won’t accept a loss of more than $5 (1/3 of the anticipated gain) and we’ll set a stop to sell automatically if its price drops to that level.

Whatever your goals and comfort zone for investment risk, your plan is the first thing you need to get started. Put it in writing and audit your results regularly to see how you’re doing. Then, fine-tune your plan until you become consistently profitable in the markets.

  • Investing for Beginners

    The first rule of investing for beginners is to have a trading plan. Second is “lose small, win big.”

  • Value Investing

    Like Warren Buffet? Then you’ll like the value investing approach to finding market bargains.

  • Growth Investing

    Growth investing looks for assets that will outperform the market over time. Here’s how to find them.

How to Invest: Account Types

How to Invest in Real Estate

To learn how to invest, start by signing up for a free workshop:

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