Over the last couple months, I have covered many real estate topics, talked about credit scores, personal finance, and even more real estate topics, today, I am diving into talking about the stock market.
The stock market can be a daunting place for beginners. There are so many different terms to learn, and it can be hard to know where to start. But don’t worry, you are not alone. Millions and millions of people are investing in the stock market everyday. And each investor starts at the same spot in a point of their life, and that spot is known as being a “beginner investor”.
Before you start investing into the stock market, there are a few basics to investing that we need to understand.
What is a stock? A stock is a share of ownership in a company. When you buy a stock, you are essentially buying a piece of the company. If the company does well, the value of your stock goes up. And if the company does poorly, the value of your stock will go down.
How do I buy stocks? You can buy and sell stocks through a brokerage account. There are many different brokerage accounts that are available, so do your research and find the best brokerage account that fits for you!
What are some factors to consider when buying stocks? There are many factors to consider when buying stocks, including the company’s financial performance, its industry, and its competitive landscape. You need to also consider your own risk tolerance and investment goals.
Here are some tips for any investor investing into the stock market:
- Don’t Delay. The sooner you start investing, the more time your money has to grow. This is the most important tip when it comes to investing!
- Invest for the long term. The stock market is volatile, and there are ups and downs along the way. You are almost guaranteed to make money by the time you are ready to retire. I say “almost” because I believe nothing is ever 100% guaranteed, because the market could be at a down turn at the time you retire, and also what you invest in matters!
- Diversify your portfolio. Don’t put all your eggs into one basket! This means don’t just invest into Apple, or just into Tesla. You should invest into multiple stocks because if one stock fails, you have other stocks to help keep your portfolio afloat. Any easy way to diversify your portfolio is to invest into index funds, mutual funds, or ETFs. Keeping your portfolio diversified helps keep your risk level low, and can help you sleep at night.
- Rebalance your portfolio. It is important to rebalance your portfolio often. Younger people can balance in a way to be more aggressive, seeking after high growth. Older people need to lean toward protecting their portfolio.
I began investing into the stock market at the age of 18, and the Financial Advisor at my local bank told me that he believed that I was the smartest 18-year-old that he had ever met. Just by thinking long-term financially. I shortly stopped and didn’t return back to investing again until I was 27-years-old in 2019. In 2018, I spent about the entire year educating myself on what brokerage should I go with to start investing with, what brokerage account I should open, and how or what I should invest in. I am going to quickly go through all of these questions you may have!
What brokerage do I use? One day I was watching youtube videos and heard someone recommend Vanguard, and why they love Vanguard. Going through my due diligence process, I went with Vanguard, and I have been so happy with them ever since.
What account do I use? I use a Roth IRA. I really like this account because your money grows absolutely tax-free! Last year, the Federal Reserve increased the contribution limits from $6,000/yr to $6,500/yr. If you wait until 59.5-years-old, you will be able to withdraw the full amount. If you withdraw sooner than that, you will face a 10% penalty. Other types of accounts may be more viable for you, but this is what I like.
What are my investing goals? I am a long-term investor. I like to look at numbers over the long-term and see how certain stocks have performed in the past. I do like to do a little bit of short-term investing from time to time, to try and “flip” a stock to make a quick profit. I don’t do that often because the high risk is just too much for me.
What do I invest in? Okay, so I have about three brokerage accounts. My primary account, (Vanguard) I invest into ETFs, Exchange Traded Funds. I personally have a few ETFs that I like to invest in. I also have a retirement account through my employer that I invest into individual stocks and ETFs. I also have what I like to call my “play money” or “play account”. I like to buy fractional shares with my Robinhood account.
Okay, I am done rambling. This has been fun talking about stocks. This is one of my favorite things to talk about, besides real estate.
“Be fearful when others are greedy and greedy when others are fearful.”
-Warren Buffet
Alexander Kroening- REALTOR 