Investing in stocks is one of the best ways to build wealth and own a portion of the world's most amazing business. Stocks are portions of real companies that are publicly traded across international stock exchanges.
My goal is to make you financially independent and secure using the power of stock market investing.
A whopping 46% of Americans currently do not invest in the stock market. I think that's a shame because all of us spend our hard earned money with several publicly traded companies like Google, Apple, McDonald's, and others every day.
If you enjoy the product, why not enjoy owning the stock too?
Hopefully, this article will change your mindset into a positive one where you embrace stocks and shift towards a wealth building mindset instead of consumer mindset.
You can consume your favorite products and services while building wealth at the same time. You can then pass down this wealth to your children, relatives, or favorite organization in the future. It's important to think long term and prepare for the future now so you have more options in life.
How do you get started? Read this step by step guide showing you how to invest in the stock market even if you're a complete beginner.
Decide How Much to Invest
The first step to investing in stocks is figuring out your initial investment amount. Whenever someone asks me how much money they need to invest, I recommend starting off with at least $100.
Most brokers don't have a minimum deposit but you want enough money to buy at least one share of a decent company. Getting started is more important than anything else.
Here's a couple ideas for intial investment amounts to get you started on the right track:
- $100,000 or more
Someone you reading this article are sitting on a large pile of money (more than $100k) but don't know where to invest in. Later on, we will talk more about asset allocation, portfolio construction, and choosing between growth and value stocks.
For now, I want you to come up with an initial amount that works for your u.
Open an Online Brokerage Account
You need a brokerage investing account to invest in domestic and international stocks.
Your brokerage account allows you to buy and sell stocks during normal trading hours.
You can also buy stocks direct through the company but most people prefer to use 3rd party brokers for accessibility, liquidity and ease of use.
Research is one of the most important strategies to building a winning stock portfolio. You can't simply buy what's being talked about on CNBC and do well. The stock maket is an emotional, volatile machine that operates on fear and greed. Research allows us to separate ourselves from emotion and invest with sound reasoning and good instrincts.
In this section, I'll cover how to research companies and uncover stocks trading at a discount to their true value so you can earn a good return on your portfolio.
See Which Products & Services You Use Regularly
I often find the best investment ideas by taking a look at my own persoanl spending habits. Why? Because if I like a certain product, chances are the company is doing a good job, has sound management and is making a lot of money. Take a look at your own buying habits and see which products/sevuces appeal to you.
Most products clearly list the company name and brand infomration on the packaging. Household items like toothpaste, hair care or beauty products list the company name in fine print on the back of the label.
Once you find the company name, just Google “company name + stock” or “company name + investor relations” to see if it's publicly traded. Certain brands are owned by a parent company that trades on a major US stock exchange.
If the company is not publicly traded, then you cannot buy stock because it;s privately owned. You can always look out for a potential IPO in the future, though.
Types of Stocks: Growth Vs Value
Stocks tend to fall under two types of categories:
- Growth stocks
- Value stocks
Growth stocks are companies with fast-growing revenue but don't necessarily post a profit. Tech stocks, solar energy stocks and cannabis stocks are examples of industries with tons of growth investing opportunities. You aren't paying from profits today; You are paying for the growth and expected earnings in the future.
Value stocks are generally older, more established companies with a long history of profitability and dividend payments. Stocks like At&T, Walmart and Coca Cola fit into this category. These stocks are better suited for income investors who want to collect regular dividend payments.
Determine Your Portfolio Allocation
When it comes to portfolio allocation, it all depends on your investment goals and time horizon. Your portfolio will be made up of a mix of stocks (long term investments), bonds (short term income producing assets) and cash.
A conservative rule for building your portfolio is the rule of 100. You simply determine your stock & bond mix by subtracting your age from 100.
Ex. If you are 40 years old, then your portfolio will be 60% stocks and 40% bonds. We subtract 40 from 100 to reach 60. As you age, your portfolio will continue moving towards bonds to protect your principal and preserve your equity.
Set a Budget
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