How to Use Technical Analysis to Inform Your Investment Choices

Investing is one of the best ways to grow wealth and save for retirement or other long-term goals. Depending on your risk tolerance and investment timeline, you can use a variety of different investment products, including stocks, bonds, mutual funds and real estate.

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The Stock Market

The stock market is a vast trading network that helps investors buy and sell shares of publicly-traded companies. It includes the New York Stock Exchange (NYSE) and Nasdaq, which act as behind-the-scenes facilitators for most trades people make within their investment accounts, as well as “over-the-counter” trades that take place outside of these exchanges.

The market serves 2 key purposes: it allows businesses to raise money often referred to as capital by offering their shares for sale, and it gives investors the opportunity to profit from those shares in the form of either dividend payments or capital appreciation. It’s also a significant indicator of economic health; rising stock prices are associated with growth, while falling stocks may signal problems ahead.

Investors can participate in the stock market by opening an account with a brokerage firm that’s licensed to help you purchase and sell securities. The process is typically automated and largely online, so you don’t have to be an expert to get started.

The Bond Market

Bonds have been relatively inexpensive by historical standards for decades, but the relative bargain is likely to come to an end in the second half of 2024. Generally, bonds offer lower risk than stocks and more steady income, but they also tend to have less potential for growth than stocks or cash.

Unlike stock, bond prices aren’t listed on a centralized exchange, and individual bonds can be bought and sold through a broker (in the secondary market). Buying and selling costs may include commissions, markups or other fees that can significantly impact the final price you pay.

When you buy a bond, you’re lending money to the issuer, usually a government or corporation. That money pays you interest periodically and then returns your principal at a date known as maturity. Bonds are rated by credit rating agencies to help investors assess the quality of each issuer’s finances. As with a loan, the less creditworthy the borrower, the higher the bond risk.

Real Estate

Real estate is one of the most common ways to invest your money. It offers several benefits, including a steady income stream from rental properties, capital appreciation and tax incentives. However, it’s important to understand the risks of investing in real estate before you start buying property.

The most popular form of real estate investment is purchasing residential investment properties and renting them out. Another option is house flipping, in which you purchase a property and add value through renovations or other upgrades before selling it for a profit.

Passive investments in real estate also exist, such as commercial shopping centers, self-storage buildings and hotels. Many investors prefer these types of passive investments because they generally have a lower correlation with the stock market and can provide a steady income stream while also diversifying your portfolio. They can also be a good choice if you don’t have the time or resources to manage your own properties.

ETFs

ETFs can help beginners diversify their portfolios with a single trade, and many are relatively low-cost. However, new investors may fall into the trap of checking their portfolios too often and making emotional knee-jerk reactions to market moves. Those over-trading habits can hurt your returns over time.

Geographies: You can find ETFs that track a variety of global stock markets, from broad indexes to more narrowly focused ones such as individual countries. Currencies: You can also get exposure to a basket of currencies or specific ones, including emerging market currencies. Sectors and industries: There are ETFs that track stock markets or individual sectors, such as health care or homebuilders. Investment themes: You can find ETFs that offer exposure to multi-generational investment themes, like sustainability or technology.

You can use a discount broker or traditional brokerage to purchase ETFs, but make sure they offer the type of assets you’re looking for and that they have fee-free trading. You can also consider a robo-advisor that manages an ETF portfolio for you automatically.