How can I practice investing in the stock market?

I am interested in investing in the stock market, but am still too young to invest and don't have the necessary skills. How can I practice doing this for when I get older?

Investing, Stocks, Starting Out
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December 2016

The stock market is a complex animal, taking the initiative to start learning young is smart. There are a few ways you could approach thinking about this, I will list a few basic tips to get you started on the right path.

Online stock market simulators can be useful in getting yourself familiar with the market. Simulators can be even more valuable if you understand how they are different than actual investing. Usually, simulators will start you off with a large sum of money which would be unrealistic for someone that is trying to start investing from the ground up. A lot of simulators often don't include trading costs, which is something that needs to be considered when trading and investing. Above all, simulators negate most of the emotions of investing because it's not real money. There are a lot of emotions that come along with investing and should be considered, this is called behavioral finance.

Besides becoming familiar with the market, start educating yourself about it. Don't focus too much on one strategy; if you are interested in growth-style investing, make sure you learn about value investing as well. Moreover, make sure that your knowledge is well versed because you don't know how your investment philosophy will change as you age. You can start learning about various investing strategies by reading books, reading articles online, or talking to more experience investors. A good first book about investing I recommend people read is, "The Little Book That Beats the Market" by Joel Greenblatt. The book breaks down the complexities of investing and makes the concept easily relatable and understandable.

The last thing you should consider is to make yourself accustomed to the idea of saving. Most people have to slowly step their way into the stock market through IRAs, 401(k)s, or brokerage accounts by deferring a portion of their income or cash flow month to month. Not many people get the opportunity to dive into the investing world with a large sum of money, most people have to accumulate it over time. Starting to save early, along with getting yourself used to the idea, can prove to be beneficial once you are ready to start investing.

Overall, there is no right answer of where to start and starting can be very hard since there are so many opinions floating around. My advice would be to familiarize yourself with the investing world, start saving, learn from all different types of sources, and keep an open mind. 

I hope you found this helpful.

December 2016
December 2016
December 2016