Investing in stocks is a great way to make some money for retirement or even just for a big-ticket purchase. The stock market can seem overwhelming to someone who is not experienced. There is no need to fear because there are four major ways to invest in stock that are not intimidating at all.
One of the easiest ways is to participate in a 401(k) or 403b plan offered by an employer. These plans are usually managed by a broker or financial advisor who selects the stocks and funds to offer in the plan. Individuals choose how much of their pay they want to contribute and determine the allocation of the contribution between desired stocks. Some plans feature an employer matching provision that is like free money in the pocket.
Investing in an individual retirement account, or IRA, is another relatively easy way to get exposure to stocks. There are Traditional, Roth, Rollover, Simple, or SEP IRAs to select from and each has different eligibility criteria. Individuals may be able to open these directly or they may be required to go through a financial advisor.
Opening a brokerage account with an investment firm allows an individual to purchase stocks and get the advice of a financial professional. Brokers consider an investor’s financial goals and investment timeline when providing advice regarding recommended stocks. The broker handles the stock transactions and tracks daily stock performance.
Participating in a direct stock purchase plan allows an individual to purchase shares of stock directly from the offering company. This eliminates the middleman, the broker, thus reducing the amount of extra fees that the investor must pay. Individuals should do online research to find companies offering these plans. They should also find out which companies offer dividend reinvestment plans because these are a great way to increase returns while owning just one share of stock.
Don’t forget to read our guide on how to buy stocks online.