One of the reasons that our people don’t invest in the stock market is because we often look at the numbers and get overwhelmed. We look at it as some uncrackable code, so we avoid investing and miss out. This causes our community to lose massive amounts of wealth on a yearly basis. This guide was created to take all of the myth and mystery out of investing stocks.
The 5 Basics of Stock Ownership
- Owning a share of stock is the same as owning a small piece of a company.
- Stock values can go up or down based on what other people are willing to pay for the stock.
- Stocks can be bought and sold as often as you like (day trading) or you can hold them long term.
- Never put all of your eggs in one basket (diversification).
- You can start investing for as little as $5.00 (five dollars)
Understanding The Numbers
Symbol: How the stock is identified on a stock exchange.
Description: What the company does.
Price: The current price of the stock
Open: The price the stock begins selling at for the day.
Close: The price the stock ends selling at for the day.
Dividend (Div): A small portion of the profit paid to shareholders.
Change: Green = Good (gain), Red = Bad (loss)
52 Week High: The highest price paid for the stock in the last 52 weeks.
Diversifying Your Portfolio
We’ve all heard the saying, “never put all of your eggs in one basket.” This saying applies directly to stocks as well. There are two basic ways to diversify your portfolio.
- Exchange Traded Funds (ETF)
- Build Your Own Portfolion
Exchange Traded Funds (ETF)
Exchange Traded Funds are similar to a fruit basket. All of the work is already done for you. You just have to buy the basket.
- ETFs come with a mix of pre-selected stocks.
- Your money is spread out across those stocks automatically.
- ETFs can be chosen based on how conservative or aggressive your investing style is.
Investor Level: Beginner – Experienced
Acorns: Perfect for automatically investing in ETFs. It comes with an account and routing number so you can have your money directed deposited into the account and select how much you want to invest. It also comes with a debit card that will allow you access to your cash, and you can round up each purchase to automatically invest whenever you spend.
Build Your Own Portfolio
This is the option for more experienced investors. You pick your stocks individually to make up your portfolio. Unlike EFTs, you must purchase whole shares in most cases.
Stash: A great app for beginners that want to try out EFTs, but it also has the option of allowing you to invest in individual stocks of your own choosing. Like Acorns, it comes with an account and routing number for direct deposits, and a debit card for easy access to your money. You can also set your account to automatically round up, so that you automatically invest your change whenever you spend using your Stash card.
Investor Level: Experienced
While some trading platforms will offer several risk tolerance levels, there are really only three:
Conservative: Less risky and usually provide reasonable returns.
Moderate: Similar to conservative, but may include a higher mix of stocks that pay dividends.
Aggressive: Willing to take more risk in exchange for higher returns.
You don’t have to choose your style… it kinda chooses you as you gain experience. Now that you understand what risk tolerance is, there are two main options for investor styles and various hybrid models of the two.
- Day Trading
- Buy and Hold
This is an EXTREMELY risky form of trading and usually requires the risk of lots of cash to be worth your time. This style is very aggressive.
- Day traders constantly buy and sell throughout the day.
- One bad day can cost you a lot of cash.
- One good day can reap huge rewards.
Buy and Hold
While most trading platforms will give you a mix of stocks that fit an “aggressive” profile, next to day trading, the strategy is more moderate in my unprofessional opinion.
- Shares are usually held long term.
- One bad day won’t make or break you.
- One good day won’t make or break you.
Its never to early to start investing in our kids. This can be done by using a custodial account.
- This allows parents to invest on a child’s behalf.
- The child can’t touch the portfolio until their 18th birthday.
- Great way for children to learn about investing.
Investing a little bit on their behalf now could result in them having a little bit of a head start in life later. It could mean the difference between them being comfortable and not knowing where their next meal is coming from. It’s that important.
Stash: If you upgrade to their $9.00 per month plan, you’ll get an IRA (individual retirement account) and 2 custodial accounts. If you have more than two kids, each parent can set one up for a total of 4 custodial accounts but each upgrade will cost $9.00 per month. Another upside to stash custodial accounts is that anyone can set one up for a child, even if it’s not their own child. As long as they have their social security number and date of birth, the child will be the beneficiary of the account.
|Disclaimer: I'm not a financial expert. Actual results may vary. Investing has risks, and investments are not guaranteed. Any information found on this site is for educational purposes only.