Investing for Beginners

The stock market can look extremely overwhelming if you’re unfamiliar with investing. From the list of technical jargon to the overwhelming number of questions you may have, investing is complicated. Once you understand it, investing can be an excellent way for people to earn extra income without having to work overtime, but it does come with some risks.

What is the Stock Market?

Public Stock

Public stock is when a public cooperation makes shares available for the general public to purchase.

There are two different types of public stock:

Common Stock gives the buyer partial ownership of a company. This means that the company and the buyer make and lose money in equal amounts. Purchasing common stock also grants the buyer the right to vote on company matters, including corporate policy and leadership decisions.

Preferred Stock gives the investor a fixed income, so they’ll get a certain percentage of the money a company makes each year. An example of this is if someone buys preferred stock for $40 that has a 10% yield. At the end of the year, they’ll receive $4.00 in dividend income.

Private Stock

Private stocks are nonpublic. This means that the general public doesn’t have access to them, so ownership is limited to a small group of employees or internal company investors.

Buying and Selling Stocks

A brokerage account is one of the most common ways for people to buy stock shares. You can put money into a brokerage account for the purpose of investing it yourself or letting a licensed professional invest it for you.

It’s essential to note that you will likely need to deposit some funds into your brokerage account initially. Although there may be no fees to open a brokerage account, it’s not uncommon for people to invest upward of $50 million to open one.

Investment apps like Robinhood, Stash, and TradeStation are another way for people to start investing with little to no money. Just remember, these apps like to gamify the stock market experience, making it riskier because it feels as though you’re playing a game. These apps also ask for sensitive information, so be sure to do your research before giving any personal details to an app.

Why is it important to invest in the stock market?

The key elements of financial health are knowing how to spend, save, invest, borrow, and plan effectively. Understanding the ins and outs of these core components will help families become and stay financially healthy. In fact, investing is one of the most effective ways to save enough money for a comfortable retirement.