Paying off debt and saving money are two great ways to solidify your financial stability, but you can't make your way to true wealth.
how to invest in stock market
These days you need money that can grow despite inflation. Whether you want a big retirement nest egg or just want to grow your money, investing in stocks is a great way to build wealth.
Here’s how to invest in stocks for beginners in 2022:
Set your financial goals. Are you more aggressive or conservative?
Choose an investment approach. Pick your stocks, find a broker, use a robo-advisor, or join your employer’s 401k.
Have a budget to invest. Depending on your setup, you will need $100 to $1,000 to invest in stocks.
Create a brokerage account. Popular options include Fidelity, Merrill or E*TRADE or apps like Stash, Acorns or Robinhood.
Choose actions. Diversify where you invest, avoid high risk stocks, choose Blue Chip companies or invest in ETFs.
Manage your portfolio. Check the performance of your investments, continue to finance them and sell shares if necessary.
Investing in stocks will make your money work for you. Instead of leaving your money in an idle bank account, you can invest in a handful of stocks today for a profit along the way.
Of course, investing is complex. For me, it was a totally foreign idea and I was afraid of it. Most of us know we need to invest, but confusion and fear often get in the way.
As a former stock newbie, I get it! So here’s the ultimate guide on how to invest in stocks as a beginner in 2022, courtesy of a former investing newbie.
What are stocks?
Money makes the world go round, so when a public company needs extra money to grow, it often uses shares to raise funds.
Stocks are interests that investors (like you!) buy in a company. Each share is sold in a unit called a “share” and the more shares you have, the more stake a single company has.
When you buy a single stock, you are interested in the behavior of that company. If the business is doing well, you make money. But if the business is not doing well, you can lose the money you invested, which is why stocks can be risky.
How do stocks make me money?
Investors like to buy stocks because they can generate passive income. There are two ways to make money with stocks:
You buy stocks at a low price, wait a few years, then sell the stocks once their price has risen.For example, if you bought shares at $5 per share and then sold them at $70 per share, you could sell them back and pocket the difference.
Quarterly dividend earnings from your investments. These payments are the company’s way of rewarding you for letting them “borrow” your money.
Businesses use your money to launch new products, hire employees, and do other capital-intensive activities. As an investor, you hope that the money you invested today will last even longer when the business is bigger and more profitable.
The two types of shares The two main types of shares you will encounter are:
Ordinary
With ordinary shares, you can earn interest on your shares and vote at shareholders’ meetings. Fun fact: I own common stock of Amazon, which means I can wreak havoc at their annual general meetings, which I do with great enthusiasm.
Preferred
You generally don’t get voting rights with preferred stock. However, many people like this type of stock because dividends are paid before anyone else. If the business goes bankrupt, that means you potentially get your money back while everyone else gets nothing.
I usually choose common stock because I like voting rights, but it depends on your preference. If you don’t care about voting rights and want more secure payment options, you can always opt for preferred stock.
The great thing about investing in stocks is that there are so many ways to do it. Everyone is different, but these are the most common ways to start buying stocks.
This option is not suitable for beginners, but you should know that you have the power to choose and manage your actions. Frankly, I’ve never had time to do this, but if you’re really interested in investing and want to get to grips with your wealth management, you can always create your own DIY investments.
With a broker, you hire a human expert to manage the stocks you buy or sell. A full-service broker is ideal for people who have a lot of resources, but as a beginner, you would like to use a broker discount to guide you without the commissions skyrocketing. No matter what type of broker you use, they usually charge a lot of fees that can reduce your profits, which is why many investors don’t like this option.
A robot advisor is basically a algorithm on an investment platform that guides you in buying and selling stocks.I like this option for beginners because you are able to help you without paying crazy taxes from a broker.I exhausted my retirement contributions at work before signing up for a platform with a robo-advisor.
