The rise of the Internet has made investing in the stock market easier than ever before. Previously, investors would have to go to a brokerage house and pay high fees for stock transactions. Now, they can go online and buy stocks with lower fees by using an online broker. They can also research stocks and mutual funds online.

Choose an online broker

Decide what type of investing you want to do. If you’re interested in mutual funds for a retirement account, go to a company like Vanguard or Fidelity that specializes in mutual funds. If you want to buy individual stocks or try your hand at day-trading, you might be better off investing through an online brokerage, as their fees for trades are lower than those of traditional brokerages. When selecting a broker, take into account transaction costs and maintenance fees. The more money you spend on fees, the less you have to invest, which will have a negative impact on the growth of your money long term.

Pick your stocks

Do your research. If you’re interested in opening an IRA, you’ll be looking at mutual funds. Some brokers have begun mutual funds that are targeted at people’s retirement dates. These “target” funds are managed so that the balance of the funds is shifted away from stocks (higher risk) to bonds (lower risk) as the target date for retirement approaches. Other mutual funds cover everything from large U.S. companies, small and mid-size U.S. companies, foreign stocks, and companies in the same sector (banking, real estate).

If you want to invest in individual stocks, then do your homework and research the stocks. You can get information about companies from your broker, but you should also visit their websites to learn more about them.

Buy the stocks

Once you’ve decided how much money you’re going to invest, and the stocks or funds that you’ll buy shares of, follow the instructions on your broker’s website to make your purchases.

Tips

Over the past 85 years, stocks have proven to be a reliable investment, averaging returns higher than the rate of inflation, but there are certain things that you need to keep in mind.

1. Diversify your portfolio. Remember the old adage about not putting all your eggs in one basket? That’s especially true with stocks. Spread your money over different stocks and funds, and in different sectors of the economy. This will help to provide some protection from the boom-and-bust cycles that hit specific companies and industries.

2. Stocks are assets, not money. If you’ve “made” $50,000 in the stock market in the past year, unless you sell the stock and cash out, you don’t actually have the money–you have an asset that has increased in value by $50,000. Many people have run into serious financial trouble by spending large amounts of money based on gains in the stock market, only to see those “earnings” disappear when the company goes under or the stock market crashes.

3. When investing in stocks, take a long-term view. Trying to “time” the market by buying low and selling high to make the most money is a sure-fire route to disaster.

4. If you want to learn more about how to invest in stocks, or get some practice at it before you actually invest your hard-earned money, there are free stock simulation games that allow you to start with a fake account that provides you with money to buy and sell stocks using real results from the New York Stock Exchange. One of these sites is How the Market Works, which not only has the free stock simulation game, but also teaches you about investing.