If you’re feeling hesitant about dipping your toe into the murky waters of stock investing, don’t worry—there are no alligators here.Only big-headed Wall Street traders will try to fool you into thinking you need to know their frenzied hand signals and financial jargon to invest in stocks.Here’s the truth: Stocks are one of the easiest and most profitable ways to build wealth in the long-term.But don’t take our word for it. Learn it for yourself (like the #boss you are).
Let’s start at the very beginning…
A stock gives you ownership over a share of a company’s earnings and assets. (But no free swag, sorry.)Owning a stock gives you the right to vote for a company’s board of directors, receive dividends (if and when they are distributed) or sell the stock to someone else.
So how do they make me the green?
You can make money with stocks two ways: buying low and selling high, or earning income (read: dividends) from them.When you buy a stock, you are speculating that the company will make a profit and you are hoping to participate in its success.A profitable company’s stock price should generally increase over time (after which you might decide to sell the stock for a tidy profit).On the other hand, you may choose to hold on to a stock long-term, especially if the company pays dividends and provides you with a steady stream of income.
Why would I invest in stocks instead of a fund?
Investing in mutual funds or exchange-traded funds (ETFs) comes with built-in benefits—think: someone else to doing all the research work (win!).But because this is real life, nothing comes for free, and fund managers charge fees for their efforts.If you’re willing to strap on your big-girl pants and do the research yourself, you can avoid these fees and keep the extra cash (but no shame if you’d rather not).Another (super important) benefit of investing in stocks versus funds is that most funds don’t see returns even close to those of the best stock performers.Case in point: Amazon stock has risen 61,600 percent since 1997, while a top mutual fund earned just 16.85 percent over the past 5 years.
Time to get started.
One of the best places to look for companies to invest in is your own home (yep, you heard that right).Research the company’s that make the products you already like and determine if they’re worth investing in (a.k.a. profitable). Or look here for some investing ideas.Once you decide where to put your dollars, you’ll need a brokerage account to place your investment orders.When choosing your broker, pay special attention to transaction fees. Are you planning on trading frequently, or buying and holding for long periods? Choose a broker with a fee structure that matches your needs.As your investing confidence and knowledge grow, you can start investing larger amounts of money and expand your portfolio.Best of all, you’ll get bragging rights when you start to see your stock picks profit (or, worst case, a reason to binge your favorite show with a pint of ice cream when one tumbles.)You can also try a robo investor or an app, so check out our fee free list of investing apps here.Whatever you decide, remember that many stocks experience periods of volatility. Expect even the best investments to “zig-zag” upwards.