How to Invest in Stocks: A Step-by-Step Guide

the greatest misconception about investing is that you need a ton of money to start this could have been true 20 years ago but not now hi i’m kate with the motley fool i’m going to talk about the why who how where and what of investing in the stock market if you’re ready to start investing in the stock market but aren’t sure of the first steps to take you’ve come to the right place so the when let’s talk about money you shouldn’t invest in the stock market first the stock market is no place for money that you might need within the next five years at a minimum money you plan to invest should come after your emergency fund your debts paid off and any long-term goals like money you’re saving for a down payment even if you won’t be prepared to buy a home for the next several years once those are taken care of you can start to grow the money you plan to invest while the stock market will almost certainly rise in the long run there’s simply too much uncertainty in stock prices in the short term in 2020 at the beginning of the kovid 19 pandemic the market plunged by more than 30 percent and then recovered a few short months later you set aside money to start investing but what’s your ultimate goal with your investments some of the most popular ones are retirement where the goal of investing is that your money will grow over time and be there for you to live off of once you’ve exited the workforce the earlier you start investing the more time your money has to grow earn extra income like dividends which are sums of money paid regularly typically quarterly by a company to its shareholders out of its profits or reserves protection against inflation the rate of monetary inflation is on average two percent per year if you invest in the stock market which on average returns seven percent growth you protect your money against losing economic power okay so how do we start investing all the advice about investing in the stock market for the beginner doesn’t mean much if you don’t actually have a way to buy stocks for that you need a brokerage account a brokerage account simply allows you to buy and sell stocks and other investments but you can take multiple routes here a standard taxable brokerage account is exactly that taxable but most brokerages also offer retirement accounts that come with great tax benefits a roth ira for example still a brokerage account but even more benefits for long-term investors many brokerages have gotten rid of trading fees on individual stocks so it’s easier than ever to start investing but there’s a couple of things you should consider before choosing your brokerage account to name a few what fees or commission do they charge do they offer automated investments do they offer fractional shares or do you have to buy a whole stock how is their application and website usability this account will be your gateway to investing it’s important to research which brokerage account matches your investment style whatever you invest in we advocate for a long-term focus it is possible to make money in the short term on the stock market if you’re very lucky however at the motley fool we believe in a diverse portfolio and long-term growth to see the best overall returns okay let’s go shopping the stock market the place where you can buy and sell stocks the stock market is open monday to friday 9 30 am to 4 p.m eastern standard time i want to break down the types of investments into two categories active and passive active investing requires a hands-on approach typically by a portfolio manager or yourself passive investing involves buying into a curated grouping of companies or securities let’s start with active an individual stock a stock represents a piece of ownership in a company or a share by owning stock in a company you are a part owner of that business you have stake in the business’s success now and in the company’s future for as long as you continue to own your shares mutual funds a mutual fund is a professionally managed investment fund that pools money together for many investors to purchase securities because these often involve a manager actively making investments on your behalf you’ll want to watch out for steep fees now passive the prime example of a passive approach is to buy an index that follows something like the s p 500 index fund an index fund tracks an index or a defined collection of stocks these could be well-known groupings of stocks like the s p 500 500 of the largest companies in the stock market or simpler groupings of stocks with a certain sector like tech stocks or health care stocks this is a super easy way to diversify you aren’t putting all your money on one company that way it’s a less risky option if one company doesn’t perform well etf most often exchange traded funds operate as index funds easily tracking large groups of stocks the special distinction as an etf simply means you can trade these in the stock market the same way you would in individual stock reits or a real estate investment trust is a company that owns and in most cases operates income producing real estate reits own many types of commercial real estate ranging from office and apartment buildings to warehouses hospitals shopping centers hotels and commercial forests you did it made it to the end hopefully you learned a lot from this video and feel more comfortable taking the first steps to invest into the stock market often a lot of people make investing into the stock market more difficult than it needs to be at the motley fool our purpose is to make the world smarter happier and richer

 

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