Everyone talks about how once you start earning, you should start investing. It’s a great way to make money, no doubt about it, but telling you what to do, and telling you how to do it are two different things right? Stocks is another word that some loosely related uncle will tell you is a good investment option when at one of those massive family reunions, particularly after he’s had a couple of drinks. But what are stocks exactly? How do they work? Are there different kinds? Are they available at your local Walmart? So many questions that we aren’t born with the answers to. I learned, the hard way, what stocks are all about, but I’m gonna break it down for you real quick, because you shouldn’t have to meander around bumping your head into objects like I did when it comes to stocks.
Investing in stocks – the simplified version
- Choices, choices.Stocks is one word that describes a variety of options. Individual stocks are basically a small, miniscule part of the ownership of a company. They pay dividends if the company is doing well. Mutual funds and index funds are investment options where a whole bunch of people pool in their money together, and then an investment expert takes the reigns and puts that money into different investments. There’s also government bonds and ETF and overseas investments. I won’t explain everything because you’ll probably fall asleep reading through the whole thing, and ‘ain’t nobody got time fo that!’ But I am going to tell you one thing- start by exploring these options. Just a simple Google search will prove fruitful and you should be able to tell what your options are.
- Pick your poison.If you’re starting out, stick with individual stocks and mutual funds. If you have free time, and can study the trajectory of a market and a variety of companies, then individual stocks have huge moneymaking potential. If you want to stick some money in and leave it at that, then index funds or mutual funds are a safer bet.
- Baby steps.Start small, because no matter how many articles you read, there’s only one way to master the intricacies of the stock market, and that’s through the tried and tested method of learning by doing. You are going to make mistakes and take hits, especially in the beginning, so don’t put all your life’s savings into whatever you chose to invest in, start off small and work your way up to a big portfolio.
- Spread it out.Don’t put all your money into one company, or one fund even, diversify your investments. Because even though the possibility of a big payout are more when you put all your money in one place, the risk is also that much greater, and it’s always better to play the field rather than getting tied down to one muse when it comes to investments.
- The actual investing bit.Once you’ve decided where and how you want to invest your money, get in touch with a broker. This can be done physically at the local offices of a broker, or online even. Talk to your broker regularly, and once you build a good rapport and a level of trust, lean on his advice a little, but always make your own decisions. The broker is your ‘in’ into the investment market, so make sure you pick wisely.