Step 1: Know the basics.
The stock market includes individual stocks, index funds (follow an index, like the S&P 500), mutual funds (a combination of stocks and bonds that tries to beat the market), exchange traded funds (like mutual funds, but they follow an index), hedge funds, options, futures, forex (foreign stock markets), and a myriad of other selections.
I had a well-educated, senior manager tell me today that she has a Robin Hood account, but had no clue what she was doing or how to best use it. She showed me her account that had three stocks valued at $137 and $7 in the holding/savings account.
I explained to her that Robin Hood is great starter brokerage account. It allows investors to make free trades of whole stocks and it makes its money off interest on the amount of all the account holders’ savings accounts. Since it is a simple platform, you do not need to know a lot of the lingo to buy, sell, and/or hold stocks.
She was very excited to discover what all the charts meant on her account (they showed her how each stock was doing as well as her overall portfolio) and that she could purchase another stock if she either found one for under $7 or added a little more to her account. These types of online brokerage accounts tend to use market rates (whatever the price of the stock happens to be at the time you click on buy or sell).
When you are ready to go to the next level, you can choose an online broker that offers low cost trades. Many of them charge $6.95 per trade, regardless of how many stocks are bought or sold, allow you to purchase partial shares, and give you the option of using limit orders to buy stocks with a specified time at prices you decide (call) or sell stocks within a specified time at prices you decide (put).
You may choose to work with a financial planner or financial advisor to help you choose which options to invest in. There are three types: those who get paid based on a commission, those who get paid based on the size of your portfolio, and those who get paid by the hour. Make sure you choose someone who is a fiduciary. This means they have taken an oath to work with your best interests at heart.
As a side note, your retirement account will most likely contain an assortment of index and mutual funds. Keep in mind that mutual funds tend to have higher fees than index funds because you are paying someone to try to beat the market and you pay them whether they succeed or fail.
And, speaking of fees, be aware of how much you are paying in fees. While a fee that is less than a tenth of a percent may not seem like much, it can make the difference of hundreds of thousands of dollars over time. Choose wisely.
The stock market has historically had an 8% annual ROI (return on investment, meaning how much your money will increase). But, if you look at the graph for the last 100 years you will see there is a lot of volatility ( ups and downs). Never invest more than you can afford to lose. The stock market is a great way to beat inflation, but is only one part of a diversified portfolio (all of your investments).