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Buy blue

Stock investments in established “blue chip” companies offer a great start for the investment beginner. With a market value of more than $10 billion, these stable companies serve as a lower-risk investment option. Examples of blue chip stocks currently include companies once considered high-tech growth stocks, such as Apple, Microsoft and Amazon. The S&P 500 contains a full index of large-cap companies.

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Practice makes perfect

To gain market acumen, test your risk tolerance without putting real skin in the game. Many brokerages provide paper trading or virtual accounts that simulate stock trades. This can be a fun and eye-opening way to get comfortable with stocks before investing actual money.

Since paper trading functions alongside legitimate capital, you can easily translate your practiced investment decisions into the real thing. Paper trading, paired with a financial adviser, can provide you ample education and strategic investment practice.

Diversify, and consider mutual funds

You’ve likely heard this term before: Diversify. Even when working with a small amount of money, spread your investments over several stocks to distribute your risk and protect against big losses.

Instead of individually investing in different companies, which can be daunting for beginners, consider exchange-traded funds or mutual funds. These provide instant diversification through holding a basket of stocks or other assets. They’re accessible and affordable, with low minimum investment requirements and fees. What’s more, they’re managed by professional financial institutions, which takes away the stress of decision-making.

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Chris Clark Freelance Contributor

Chris Clark is freelance contributor with MoneyWise, based in Kansas City, Mo. He has written for numerous publications and spent 18 years as a reporter and editor with The Associated Press.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.