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What is the stock market? Why invest in the stock market?Different approaches to investing in stocks3 common investment strategiesA step-by-step guide to investing in the stock market Ready to start investing?
close-up view of a stock market data board

The modern journey of many investors today begins with a simple search on the internet: How To Invest In Stocks. Perhaps one such search has led you here; perhaps you found your way through some other means. Whatever the case, welcome. This is your go-to, step-by-step guide for how to invest in the stock market. Investing is a way of looking towards, preparing for, and shaping your future: stocks are an option which all individuals should consider as a potential avenue for growing their wealth. Whether you’re looking to invest spare change or your retirement savings, understanding how the stock market works, and how you can invest in stocks, is a vital first step.

To help you understand the stock market, its terminology and rules, investment strategies, what type of investor you are, and how to invest in stocks, here’s a beginner’s guide.

What is the stock market?

The stock market is the marketplace where investors, large and small, individual and institutional, trade securities such as:

  • Stocks: A share of ownership in a company, which gives you access to the upside or downside of the business. 
  • Mutual funds: A professionally managed fund that pools money from investors and buys a variety of securities.
  • Exchange Traded Funds (ETFs): A pooled form of investment that is designed to track an index, sector, or commodity.
  • Bonds: An instrument that represents a loan from an investor to a borrower, typically a corporation or government. 

The stock market operates under a defined set of rules and regulations and is composed of different stock exchanges. 

Stock market vs. stock exchange 

A stock exchange is a subset of the stock market, where a company’s shares are held. By trading in the stock market, you’re buying or selling shares of companies listed on a particular stock exchange. There are 13 stock exchanges in the United States, including the NASDAQ and the New York Stock Exchange (NYSE). 

How does the stock market work?

The stock market is a vehicle for companies to raise money by selling ownership to investors, and for investors to potentially generate profits. Here’s how it works: 

  • Companies sell a batch of shares to a select group of investors to raise money as part of an Initial Public Offering (IPO). 
  • Once they go public, shares in the company are publicly traded. That means any investor can purchase shares via a stock-trading platform. These investors can decide to hold their shares for as long as they want or sell them. 
  • If the price of shares goes up and investors sell, they’ll make a profit. If the price of a share goes down and investors sell, they’ll incur a loss.

A wide variety of factors—including political news, financial performance of large companies, industry trends, and local or global economic developments—influence the stock market, but prices for individual stocks are fundamentally driven by a company's financials and outlook. 

To measure how the market is performing, investors track market indexes: a collection of stocks that represents a segment of the market. 

The S&P 500 (Standard and Poor’s 500) index represents the 500 largest US publicly traded companies across all sectors. The Dow Jones Industrial Average index represents the 30 most prominent blue chip stocks on the NYSE and the NASDAQ, such as Apple, Disney, and Microsoft.  You cannot invest directly in an Index.  

Why invest in the stock market?

Investing in the stock market can be a way to generate income and grow your overall wealth. Here are a few common reasons people invest in the market:

  • Earn passive income: Smart investments can lead to passive income—that is, income you generate without much day-to-day involvement. Those who want to earn passive income in the stock market can invest in companies or funds that have a strong track record of paying dividends. Note: Dividends and returns on money invested in the market are not guaranteed. Historical average returns should give you a directional sense of what’s possible, but they’re not a promise of future performance. 
  • Stay ahead of inflation: Annual inflation rates have been between one and three percent over the last 10 years. Investing in the stock market at an annual rate of return higher than the annual inflation rate can protect your money from the rising costs of goods and services. For instance, the average return for the S&P 500 index over the last 10 years was 13.9% annually. 
  • Ease of buying and selling: Brokerage accounts allow you to easily buy and sell investments at any time and withdraw the cash you make from the sale immediately. This is much easier than, say, buying and selling an asset like real estate. You can also invest as little as you can or choose to, making it a much more accessible form of investing.

Different approaches to investing in stocks

There are many different approaches to investing in the stock market, informed by factors such as your age, net worth, risk tolerance, and appetite for involvement in portfolio management. The following factors may influence your investment strategy.

3 factors that influence your approach to investing

1. Risk tolerance

Investing in the stock market is inherently risky, since there is never a guarantee that a company’s shares will increase in value. Events outside your control—such as political and economic events, natural disasters, or a change in company leadership—can impact the share price in ways you cannot predict. Your risk tolerance is the degree to which you can absorb financial outcomes that are different from what you expect. 

If your risk tolerance is low, you’re more likely to invest conservatively, say with government bonds, high-interest cash savings accounts, or certain high-performing index funds. If your tolerance is high, you might be more comfortable making riskier investments in the hopes of netting larger returns, but with a greater chance of larger losses. Higher risk investments can include individual stocks, cryptocurrency, or real estate investment trusts (REITs).

2. Time horizon

Time horizon is how long you plan to hold an investment before selling. A 45-year old investor who plans to recoup profits when he retires may have a 20-year time horizon, while a 30-year old investor who wants to use profits from investments to put a down payment on his/her first home may have a three-year time horizon. 

If you’re looking for a long-term investment strategy, we’ve got you covered. Titan’s award-winning, expert-managed portfolios offer investors of all income levels the potential to grow their wealth over the long-term. Why wait? Sign-up takes less than five minutes.

3. Involvement level 

Some investors like to be highly involved in portfolio management. They stay abreast of company performance, market news, and trends. They often pick their own stocks, and they should know how to navigate market fluctuations, rebalance their portfolio, maximize tax efficiencies, and shift their level of risk as they near the end of their time horizon. An investor who doesn’t want to be actively involved in portfolio management puts their money in the hands of a financial advisor, a robo-advisor, or managed investment solution. They are focused less on day-to-day investment activity and more on the bottom line—how their money is growing—and are willing to pay a management fee to ensure a professional stays on top of trends and keeps an eye out for opportunities.  

Another way to think about this is in terms of passive versus active investing. 

  • Passive: Passive investing requires minimal day-to-day effort. This might mean buying stocks and holding them for years, with a goal of long term growth. A common passive approach is to buy an index fund and allow your money to grow over time. A passive strategy could be less risky than an active strategy depending on the strategy. Passive investors might buy mutual funds or ETFs through a brokerage account, choose a managed investment solution, or use a robo-advisor. 
  • Active: Active investing involves frequently buying and selling stocks in an attempt to beat the market. It can offer better short-term gains, but can be a more volatile approach to investing. Active investors will manage their own portfolios via a brokerage account.

3 common investment strategies

Your investment strategy is your plan to help you achieve your financial goals. Strategies can range from conservative and risk-averse to highly aggressive. An investment strategy is one of the first things an investor will establish, either with a financial planner, robo-advisor, or on their own. Investment strategies should also be reevaluated as your personal and financial situations evolve. 

  1. Growth investing: Growth investing emphasizes the short- and long-term value that a company can provide its investors. If you think a company will grow and its value will increase over time, buying shares would be a long-term growth investing strategy. If you believe a company is about to enter a short-term period of growth, you might sell your shares before the price plateaus or decreases. Successful growth investing often involves investing in smaller companies and emerging markets that have high growth potential.  
  2. Dividend growth: With this type of strategy, investors look for companies that consistently pay out quarterly or yearly dividends to investors. Investors can reinvest their dividends back into the company in hopes of compounding returns or take their dividends as a cash profit.
  3. Value investing: Made popular by Warren Buffett, the principle behind value investing is as simple as it gets: Buy stocks that are cheaper than they should be, and then sell them when the price goes up. Companies are often undervalued by investors for any number of reasons, such as the public’s lack of understanding of a company’s core offerings. However, uncovering undervalued stocks takes a combination of analyzing the right data and having strong market experience. If you can find undervalued stocks, you’ll also need a high risk tolerance to endure the possibility that the stock price doesn’t go up and goes down.
At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective. Get started today.
Disclosures

Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see
Titan’s Legal Page for additional important information.

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A step-by-step guide to investing in the stock market

  1. Set your goals: Investment goals often run parallel with life goals. Whether you’re trying to save up for a big purchase, supplement your retirement savings, or send your kids to college, establish your investment goals so you can pick a strategy that matches your objectives.
  2. Choose your investment strategy and vehicle: Do you want to manage your own portfolio? Or do you prefer to have a professional manage your investments for you? Open an investment account accordingly:
    • Brokerage accounts give you the control to start researching companies listed on the major stock exchanges, transfer money online from your financial institution, purchase shares of public companies when you want, and keep track of your investments.
    • Managed investment accounts are owned by investors but managed by someone else, typically a financial expert. While managed investment accounts have historically been used by high-net-worth investors, Titan is a new-guard investment platform leading the world to better wealth, by bringing premier investment management to everyone.
    • Automated or “robo” accounts are investing accounts that use algorithms to manage your portfolio.
  3. Set an investment budget: How much you can set aside for investments should depend on how much you feel comfortable losing. Don’t invest your emergency fund or money set aside for your monthly living expenses. As a new investor, you may feel more comfortable starting small and increasing your investments as you gain more experience.

Ready to start investing?

If you’re ready to start growing your capital, Titan is ready for you. Our team of exceptional investment analysts manage over $500M for over 30,000 clients, investing them in our actively-managed, long-term strategies with an eye on massive growth potential. Through our award-winning app, you’ll be riding shotgun with some of the smartest investment minds in the business. Sign-up takes minutes: get started today.

Disclosures

Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see
Titan’s Legal Page for additional important information.

Become a Titan investor today.
Create an account with us in two minutes.
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