If you are a retiree who did a good job planning for retirement, chances are you’re sitting on a large nest egg and wondering how to make your money last while providing a regular source of income. You may also be thinking of splurging a bit on that luxury car you always wanted or investing in a third holiday home that a friend suggested. Notwithstanding, investing and trading in stocks is a prudent way to manage your retirement savings. However, most retirees, even seasoned business operators and talented professionals, sometimes find it hard to take care of their finances and trade stocks independently.
Retirees mostly rely on financial advisors, who charge their clients a hefty fee for their services even when those advisors might be incompetent at picking the right stock or fund for their clients. Although we believe that most retirees should consult an experienced financial advisor to plan their investments, we also think that retired folks should try to manage their assets actively. It is your hard-earned money, after all. So, if you feel ready to take the plunge and start trading for the first time, here are a few general steps you can follow to start your stock trading journey.
Step #1: Learn All You Can About the Stock Market
Yes, that’s correct. Start reading. If you are a complete newbie, you must start by getting acquainted with terms like stock index, ETFs, mutual funds, quarterly earnings, EPS, price chart, and everything else. You’ll find many free resources on the Internet to help you understand the terms commonly used in stock trading and finance. For example, free investment dictionaries like Investopedia.com are a reliable source to learn about standard investing terms. Once you have your basics down, you can proceed to the next step.Step #2: Open a Brokerage Account
Although most retirees will already have an account with a stock broker like Fidelity or Charles Schwab, if you don’t, then it’s time to register for one. Once your brokerage account is all set up, get acquainted with the trading platform. Know where you have to click or swipe to buy or sell a stock, where you need to click to see your holdings and open positions, and how you can add and withdraw money from your account. Understanding your broker’s fee structure is also vital before you start trading. That way, you won’t be hit by unpleasant surprises when you want to cash out. If the platform has the option to open a demo account, you should start there to get some practice before risking your real money. After exploring the platform, you can fund your account with real money using a credit card or bank transfer and make your first trade. But, what should you trade?Step #3: Choose the Right Type of Asset to Trade
If you have done the first step well, you will already know what an individual stock is and what ETFs and REITs are. For the uninitiated, buying a stock is basically purchasing a part of the ownership in a company. This means that your profits or losses are directly tied to that company’s performance and growth, which can be both good and bad, depending on whether or not you chose a good company to invest in. This makes stocks a bit risky, especially for new traders. Before you start actively trading stocks, we suggest you first try your hands at ETFs. Why ETFs? Because they are a type of pooled investment (think mutual funds) that track an index made up of many different stocks. This makes ETFs less volatile than individual stocks.
