How stock investing works
Investing in stocks is a way to make your money work for you, so you can build wealth. Abbott Lab's secretary Grace Groner turned $180 worth of Abbott Labs stock into a $7 million fortune over 75 years. Janitor Ronald Read, who loved learning about stocks, made $8 million in investing in the stock market. Secretary Sylvia Bloom doubled down on her boss' investment strategy and made $9 million in her lifetime. Fortunately, Warren Buffett and Jeff Bezos follow investment strategies. Despite the losses, their portfolios will recover and should benefit in the long run. Investing in the stock market is a complicated hobby. In this article, we'll simplify it so you can quickly understand the basics of investing in the stock market. This way you can start investing right away and learn more as you go, without taking too much risk.
How stocks work
When a company is doing well, its stock price is higher. When it's not doing well, its stock prices are lower. There are two ways to make money with stocks.
- (1) Appreciation
- when the price of your shares increases, you can sell your shares.
- Imagine buying a thousand shares for $100 each. Over time, your shares go up and up until they are worth $200 each.
- You could cash in and sell your shares for $200 each - congratulations - you've won $100,000!
- Or, you can reinvest your winnings and try to get that $100,000 to earn even more.
- (2) Dividends
- When a company does well, its board distributes a portion of its profits to shareholders.
- Cash dividends make money for shareholders.
- Stock dividends give more stock to shareholders.It is a way for investors to increase their investments. Reinvesting Dividends, over the decades, that's how people like Grace Groner and Sylvia Bloom ended up being multi-millionaires, even without big paychecks.
- So instead of thinking about how you can turn your income into money, think about the wealth you will create by continually reinvesting your income into stocks.
What is a brokerage account and why do you need it
To invest in stocks/funds, you need to open a brokerage account. Without a brokerage account, you cannot buy stocks.
A brokerage account is something you open with an investment company. It’s similar to a bank account, but you use it to buy stocks and other types of investments.
You don’t need a lot of money or time to open a brokerage account and start investing in the stock market.
How Active Investing Works
If you like to know and follow the stock market and want to invest more than two hours a week, you can become an active investor.
Active investors choose their stocks and control when to buy and sell them.
Webull is a commission-free trading platform that allows you to open a brokerage account to buy and sell stocks without spending a dime on commissions. It provides you with the trading tools and analysis you need to become an active stock investor.
How Passive Investing Works
If you want to spend zero to two hours a week trading stocks, you can become a passive stock investor by buying index funds.
Investing in index funds is a convenient way to build a diversified portfolio that pays consistent profits.
index funds also offer a low-risk form of investing, since you buy a group of stocks instead of betting large amounts on specific companies.
“If you don’t want to spend hours studying and tracking the stock market, passive investing through index funds is a great option.”
For example, opening a free account on M1 Investissement allows you to create a “pie” investment plan. You select investments, add them to your “pie”, then determine how much of the pie each investment will hold.
