Investing in Stocks: A Beginner’s Guide
By Martha Wyatt-Luth | March 31, 2022
The stock market–a place of great vivacity that is capable of tremendous feats and dismal despair. People, far and wide, invest in this enigmatic entity. While some can take away millions of dollars, others can lose nearly everything but the ground beneath their feet. With this being said, how does one even break into such an intimidating activity?
Investing in stocks can be quite simple and far less extravagant than what The Wolf of Wall Street might lead one to believe. The first step in investing is considering your circumstances. How much money do you have to invest? Do you want to reap the benefits short or long term? Is your financial situation steady or uncertain? These are essential questions for determining what kind of stock you may invest in, or if investing is even the best option for your money.
To invest in a stock it requires one to put a portion of their money in a company in the form of buying partial ownership, known as equity. Now this doesn’t mean you’ll meet in meetings for the company, or even be considered a member of the company. It essentially means you are backing the company, supporting it, and hoping it continues to perform well. Companies offer stocks when they are publicly owned, such as Apple with over 16.32B shares outstanding. A share of apple stock is $166 as of the third week of march. In 2019, the average price of Apple stock was $52, in 2010 it was less than ten dollars, and in 2004 it was less than a dollar. Someone that invested in Apple in 2004 would gain much more money than someone who invested in it today but back in 2004, the company’s future was still very unknown. Investing in riskier stocks makes sense if you don’t consider that portion of money essential for living or if the company means a lot to you.
Generally, investing in a stock should be considered a marathon, not a sprint. For one, investing in a stock is different from a fund. While a mutual fund is comprised of multiple companies, a stock is just one individual company which will likely have more volatility than a fund. An index fund, such as the S&P 500, uses a certain number of companies in a fund to invest in with small share portions to minimize the risk. This is a strong option for individuals that don’t have a particular stock in mind and if the stock market seems to be healthy and steady overall. Much of this has to do with external factors like the political climate of the US. And even internationally. When tariffs are sanctioned, for example right now with Russia due to the Ukraine crisis, the stock market is negatively affected.
Many people decide to use advisors to help create a stock portfolio that will most accurately decide a successful and least risky avenue for investment. These people will consider trends in prominent company earnings, debt-to-equity ratio, substitutes in the market, and more.
An alternative route is to use investment apps such as Robinhood. This is generally a safe route if all you want to do is invest small amounts of money. The app was created with the hopes of breaking barriers to entry in the stock market through creating a fully mobile brokerage service offering zero-fee trade and minimal additional costs when buying and trading stocks. However, using Robinhood to create a diversified stock portfolio may be quite difficult because mutual bonds and funds are excluded.
In short, there are many options for beginner investors, whether that’s using apps like Robinhood to put in change money or contacting a portfolio manager. In this age of technology, the options seem to be endless. It is never too late or too soon to start!
Disclaimer: This Content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice. Nothing contained in this paper constitutes a solicitation, recommendation, endorsement, or offer by The College Street Journal to buy or sell any securities or other financial instruments. There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, and money market funds involve risk of loss. Loss of principal is possible. A security’s or a firm’s past investment performance is not indicative of future performance.
Edited by Zachary Elias