Basics of Stocks

A beginner must first understand the basics of stocks. A stock is also known as a share and represents the percentage ownership of a company. For example, if you own ten shares of a company with 100,000,000 total shares, you own 0.00001% of the company. Public companies' stocks trade on exchanges, like the New York Stock Exchange (NYSE) or Nasdaq, the two most prominent in the US. Small investors do not usually buy and sell shares from the company. Instead, they buy and sell stocks on an exchange through a brokerage firm.

Benefits of Investing

The biggest (and most obvious) benefit of investing is that it allows you the opportunity to grow your wealth. However, the benefits don’t stop there. Other benefits of investing include:

• Creating a Stable Financial Future

Feeling secure in your finances is one of the greatest feelings in the world. Imagine if you never had to worry about having extra money to cover unexpected bills or emergencies. Sounds pretty great, right?

• Saving for Retirement

Along the same vein, if you would like to retire someday, you’re going to need the funds to be able to do so. When thinking about retiring, consider when you hope to retire and the lifestyle you’d like to lead once you are done working. If you want to retire early, you’ll need to begin investing now to promptly reach your goal.

And last, but not least…

• Building Generational Wealth

If you’ve been thinking ‘Are stocks a good investment?’ I’ve got your answer.

Investing in the stock market is a tried and true way to build generational wealth for decades. Your investments will continue to grow year over year, keeping your family and loved ones indefinitely in a fiscally secure spot.

Investing Quotes

“The most important quality for an investor is temperament, not intellect.”

— Warren Buffett, CEO of Berkshire Hathaway

“The biggest risk of all is not taking one.”

— Mellody Hobson, co-CEO of Ariel Investments

"With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

"In investing, what is comfortable is rarely profitable." — Robert Arnott

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." — Robert G. Allen

With many people learning about investing and how it can help them secure the future of their dreams, many “investment” schemes have sprung up to take advantage of newbies. Here are 4 ways to identify a good investment:

• You can start small: Not all investment programs will allow you to start small but most should give you the option of starting with a little amount, to allow you to understand how it all works.

• No outrageous ROIs: Money is hard to come by and the process of making it is harder so don’t be enticed with outrageous ROIs - especially when it’s within a short time. Making legal money takes time.

• Complete Transparency: Every investment plan should tell you how your money is going to be invested. There should be a clear process for you to understand; if a part isn’t clear, you should be able to ask questions and get a response.

• Education: Educating you on your finances is a priority - after all, you have to understand how your money is being made. They should teach you the basics of investing and finance as well.

We hope with these few points, we have been able to help you make the right investment decision.

Risks for Stocks

Stocks are not risk-free. Most people are familiar with low-risk savings accounts and Certificates of Deposit (CDs) that are, in many cases, insured by the Federal Deposit Insurance Corporation (FDIC). On the other hand, stocks have more risk and investors can lose money because stock prices may decline during a correction or a bear market. For example, in 2022 the broader stock market was down more than (-10%). This decline is considered a market correction. However, some trendy growth stocks are down even more. For example, Netflix (NFLX) has declined by about (-67%) year-to-date.

In addition, public companies can perform poorly and declare bankruptcy, effectively wiping out shareholders. Hence, a beginner should focus on safer stocks and diversification. Putting all your money in one high-risk stock places the principal at risk for loss.

Assuming you have educated yourself about stocks and the risks, beginners asking how to buy stocks should start by selecting a brokerage firm.

Cheers to your success 📈

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