So, you’ve seen the headlines recently. High volatility in stock markets around the world has seen billions of pounds of value added and taken away from blue-chip companies. You’ve maybe twigged to the fact that you and your friends have been ordering deliveries on Ocado a lot more over the past few months. A quick look at the Ocado share price shows that the stock has surged in value since the start of the pandemic. The same can be said of US-listed firm Zoom, and many others. This has led you to search for how to invest in the stock market, and landed you here!
First things first
Investing in the stock market can be a very rewarding experience. But before you actually enjoy the feeling of seeing a stock rise in value, you need to get your basics right. Firstly, you need to get yourself set up on a platform where you can buy and sell stocks. There are countless providers out there for this.
Make sure that whoever you choose also has the ability to operate your Stocks and Shares ISA for you. An ISA is a valuable tool provided by the government that allows you to invest up to £20,000 a year without paying tax on the proceeds. So if you’d invested in Ocado at the beginning of the year and were now sitting on a 75% gain, this profit would be all yours.
Also, be careful not to mistakenly sign up and start using a trading account with leverage when investing. There’s a difference between buying £1,000 worth of HSBC stock in your ISA, and leveraging £1,000 fifty times on a spread betting account. The latter actually gives you a £50,000 position, which means your losses could exceed your initial deposit amount.
Once you’re all ready to go, it’s up to you what you want to buy. Some stocks you’ll have already heard about and want to buy. Some great success stories in the public eye are Ocado, JD Sports, and Rightmove. Even as a UK investor, you can buy US-listed stocks as well, such as Amazon and Tesla.
Try to mix up what you invest in, both in the amount and the sector. Splitting up your initial investment between a dozen stocks should serve you much better than putting everything into one company. Mixing up sectors as well should help to diversify your overall portfolio. If you just invest in one sector, then you could be very exposed to something negative impacting that set of businesses.
Once you’ve invested, try and forget about the stock for the moment. Try to detach yourself from the emotional side of investing and be purely subjective. For example, let’s say you buy Ocado shares now with the aim of selling when you reach 20% profit. Set an alert for this level, along with one if it falls by 20%. Then leave it. Monitoring the share price every hour of every day is only going to send you crazy!
This is not a complete guide on how to invest in the stock market. It’s merely a taster of some things to do. As such, I’d suggest reading the top stocks for August from the Motley Fool authors, where you can find even more unbiased advice.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. The Motley Fool UK has recommended Rightmove and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.