Investing in Stocks in 4 Easy Steps

Sherpa Sense:

Investing in the stock market is one of the best ways to grow your money over time. It’s actually easier and more rewarding than you might think.

“Buy into a company because you want to own it, not because you want the stock to go up.” Warren Buffett

Let’s Yak:

Have you ever been curious about the stock market? It’s in the daily news and people seem to get all excited when their stocks are either up or down.

So let’s get started. Is there a company or a business that you are drawn too? For example, are you into gaming, i.e. Electronic Arts? Do you drink Pepsi, or eat Dorito chips?  Is McDonalds a burger you just can’t live without? Each of these companies is publicly traded and what that means is you can buy shares (stock) in them. A share is ownership for a small piece of the company and can be bought and sold.

Pay attention to the places you like to visit or things you buy. Then investigate the company that provides these products and see if they are publicly traded. Publicly traded companies have to publish all the financial info about the company.  It can be confusing at first but over time you will start to understand the company’s debt and profits and what the share price has done over time.

You don’t need a lot of money to get started. There is a transaction fee and many times the thought is to invest enough to cover the cost of the transaction fee. Look at some expendable monies that you have and consider just getting started by buying a share or two and then watching what happens to it can be fun.

Some stocks pay a dividend on an annual basis.  What this means is if the company makes a profit, they share this profit with the shareholders (that’s you). You can receive a dividend check or you can have the dividend reinvested to buy a partial share of the stock.

And we’re not talking about taking money that you should be using to pay off a credit card, or what you need for school, or for paying your rent. Try this with some money that you can live without. Don’t invest in stocks for a short term gain. No one can predict what a share price will do in the short term. Buy stocks that you think will perform over the longer term. Think years, not months. #besmart

Take a Hike:

  1. Do your homework and decide what stock you want to invest in and what the cost is per share.
  2. Find a broker or a discount online broker and set up an account.
  3. Contact the broker when you are ready to buy some shares of stock –
  4. Watch how your stock performs over time.

If all this makes you nervous, pretend to buy some shares of a company and watch how it performs over time.

Yakety Yak:

Watch what is happening in the world and how it can affect your stocks.  For example, what does your Electronic Arts stock do after it releases a big new game? We aren’t saying to react but to just watch and pay attention to events happening in the world.

Read about Warren Buffett who has made a very successful career out of buying stock of companies that he believed would perform well over time. Why should you take the risk to invest in stocks? Because the stock market has averaged ~7%/year return for the last 30 years. Compare that to what you could make in a savings account (average rate for saving accounts for 2018 was ~0.08%) and you see why people are willing to risk some of their money to buy stocks.

Peak Outlook:

Never invest in a stock recommended after being out with your drunk friends.

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