Getting started as a new investor in the stock market
Considering getting started as a new investor in the stock market? Here’s what you need to know first.
When it comes to investing, many women are scared of the risks. A survey by S&P Global found that only 26% of women have money in the stock market today. Instead, they are more likely than men to keep their assets in cash. However, the female diaspora has also been tagged as the next wave of growth in wealth generation across the US by a recent McKinsey & Company report.
Interestingly, while women are more hesitant to take on the risk of investing, those that do choose to invest go on to earn greater returns – up to 1% more than men. The main reason behind the gender gap in investing? Women lack confidence.
While getting into the stock market is not for the faint-hearted, there are a few basics to remember when investing. For one, the best way to overcome a lack of confidence is to arm yourself with the right knowledge from the beginning.
Spend time understanding the fees that come with investing
Before you can choose stocks or funds to invest in, you must be clear on the cost of doing so. If you are using a Robo advisory platform, they will charge a flat fee based on your account balance. Similarly, a financial planner will charge a commission for services rendered. It also helps to become familiar with standard investment terms and trends.
Following a good investment or trading newsletter can help you stay up to date with trends and get valuable training advice for investors. For instance, according to one Fast Fortune Club review, subscribers can access a Micro Currency Trading Crash Course and a Money Rush Cash Course – perfect if you’re thinking of trading options.
Take the time to research the investment platforms you may want to use, and be sure to read the terms and conditions for each. Most investment platforms charge fees between 0.2 and 2%. For instance, a popular for women by women investment platform, Ellevest, comes with annual fees of 0.5%. There are also fees per trade made on the stock market, transaction charges, and possible stamp charges to account for.
Get to know your risk tolerance
Investing is all about risk – and how much risk you’re willing to take to gain a return. Considering its unpredictability and versatility, any investment in the stock market will come with risks. Therefore, before entering the stock market, it helps to work out your risk tolerance.
This will be influenced by factors like your investment goals, intended financial resources (stock market budget), and how okay you are with making a loss on the investment. Are you investing for a short-term profit? Is the stock market a supplementary move for your retirement portfolio?
Remember not to invest any amount you are not comfortable with losing at the time. The stock market is incredibly versatile, and cannot be predicted. Ensure that your household and personal budgets are accounted for before dedicating money to invest in the stock market.
Plan for taxes as well as capital investments
Many novice investors forget to plan for the tax costs of trading on the stock market. While you won’t pay taxes on any stock purchases or holdings, you can be taxed in two other ways: if your stock holdings pay out a dividend, and if you sell stock. Since dividends are seen as income, the government requires you to pay tax on any received. Qualified dividends are typically taxed at 0%, 15%, and 20%.
There are a few exceptions, however. If your dividends are from holdings in a retirement account like a Roth IRA, then you are not taxed. Similarly, single filers with an income of $40,000 or less ($80,000 or less for married couples) are not liable for taxes on dividends received.
As for taxes paid on stock sales, you can expect to pay 15% of the profits you made on the sale. This increases to 20% for those in a high-earning bracket. An easy way to work out if you will owe taxes on your stocks or dividends is to determine the kind of stocks you wish to invest in. Retirement accounts are generally tax-free. When planning for your tax payments, it is always recommended that you keep accurate records of your transactions, and consider the merits of a tax-deferred account.
Finally, don’t make the mistake of waiting to invest. When done right, investing in the stock market can be a lucrative and dynamic addition to any woman’s financial portfolio. Whether it is planning for your retirement needs or improving your cash flow in the short term, the first step to investing in the stock market is overcoming the fear of getting started.
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