The stock market is a system for buying and selling shares of publicly traded companies. Shares represent pieces of ownership in a company, and the price of a share is determined by supply and demand.
When you buy shares in a company, you are buying an ownership stake in that company. You are entitled to vote on how the company is run and any profit it makes (dividends). The price of your shares can go up or down depending on how the company performs.
The stock market has historically achieved an average return of 10% annually which by itself proves to be better than saving money in a bank. Banks used to be the main place people would go set up a savings fund, but the interest paid on bank accounts has fallen dramatically since 2008. In addition, you usually need to have a large amount of money saved to receive any sort of decent return on your account. However, unlike a savings account, investing in stocks comes with some risks, which is why you should always educate yourself before you start using your hard-earned cash.
(Note: There is nothing wrong with saving money. It’s actually important to have an emergency fund that can cover 2-3 months of expenses in case something happens. Nevertheless, if the end goal is to build wealth, investing your money will always yield a better return in the long run)
If you’re new to investing, the stock market can be a scary place. But there are steps you can take to make the process less intimidating and help yourself become a confident investor.
Numerous individuals think that investing requires a lot of money, but in reality, you don’t need to be a millionaire to get the ball rolling. In fact, it’s possible to start investing with very little money. Whether you want to invest $100 or $500, here are some tips on how to invest in the stock market with little money.
Brokerage accounts are investment accounts that allow you to buy and sell various types of investments. These include stocks, bonds, mutual funds, exchange-traded funds (ETFs), and index funds. An account can be opened by yourself or with the help of an investment professional, such as a broker or financial advisor. You can also open an account at a bank or credit union. The benefits of investing in a brokerage account include access to professionally managed portfolios, retirement planning and research tools for analyzing stocks.
A diversified balanced portfolio is always safer than investing in only one company. It’s important to spread your money with different companies. If picking individual stocks is not for you, consider using a Robo-Advisor or a financial advisor. You can also invest in index funds and mutual funds to accomplish this. (Mutual funds and Index funds hold a variety of securities such as, stocks and bonds in one portfolio.)
Investing in stocks is a great way to grow your money. But, it can also be an overwhelming process if you don’t know what you’re doing.
Kenyon Ndezi is a recent graduate, writer, creator of vividbay.com, and the owner of Neonbuild.com, which is a company focused on building apps for small businesses and individuals. Follow along and get inspired!
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