GREENSBORO, NC -- Why not own a share of Apple stock? Or Target? I mean you shop there, why not invest?
"You're investing and compounding interest. You're investing in a company hoping their earnings will provide you a higher rate of return than just a savings account, " says Certified Financial Planner Matt Logan.
He makes a point to say you shouldn't invest the money thinking it's going to be a Vegas style situation with a double of your money the next day. That's not going to happen. And if you need to get your hands on this money in the next year, this is not for you.
But, if you have a few extra bucks, getting into the stock market doesn't have to be scary or off limits.
"There's stocks that cost a penny and stocks that cost hundreds of thousands of dollars so, I wouldn't start with either one of those."
Meta: Learn five tips about how to invest in stocks for beginners with the help of Matt Logan.
Anyone who is interested in building their wealth over time has likely considered investing in stocks. But if purchasing stocks or investing is a new concept to you, it may seem overwhelming at first. Luckily, you can easily learn about investing in stocks for beginners via some foundational information. Any person, regardless of socioeconomic standing, can build an investment portfolio beginning with small amounts, and committing to the idea of building wealth over a period of time rather than getting rich quickly.
So, how does a beginner buy stocks? To answer this question, we need to back up a bit and first discuss investing and what it is (and isn’t). Investing is when you decide to commit a specific amount of money to a business or endeavor with the hope that profit will be acquired. Noted investor Warren Buffet likes to openly share his investment tips with others, explaining investments as a practice of committing money now to make more in the future. This process of making money is completed by strategically putting money in a variety of investment vehicles, anticipating growth.
1. Invest in public companies
2. Understand how the company makes money
3. Find a company with limited debt
4. Look for high barriers to entry
5. Avoid businesses with controlling shareholders
Investing isn’t easy, especially at first. You work hard for your money, and it feels good to spend your money on something that you enjoy, whether it is a new car or a new dress. But investing forces us to take a good look at the future, and determine what we want and what we will need when that time comes. The goal is your investments work hard for you now, so you don’t have to in the future.
1. Choose a mix of assets with a suitable level of risk and return potential
2. Plan should be based on your time frame, needs and risk tolerance
3. Pick a diversified mix of investments
(Credit: https://www.fidelity.com/viewpoints/personal-finance/how-to-start-investing )
How to Invest in Stocks for Beginners?
Now that you know more about investing, let’s take a closer look at the different types of investment vehicles you can choose from. Stocks are a popular investment tool, in addition to bonds, mutual funds, and real estate. Each one offers its own level of risk and potential return rate. If stocks interest you, you will want to also understand compounding and why investing early will be most helpful to you. First, the definition of compounding is: the process of producing more return on an asset’s reinvested earnings. Through compounding, your initial investment has the potential to grow exponentially. Now, let’s look at the monetary difference in investing depending on your age.
Say your goal is to amass $1 million dollars at 60 years old. If you begin investing at the age of 25, with an assumed return rate of 5% on your investments, you will need to invest approximately $880 per month to reach this goal.
If you want to reach this same goal, and assume to have the same return rate, but you start investing at the age of 35, you will need to invest approximately $1700 each month to achieve this goal.
Regardless of your age however, investing in stocks even as a beginner is a good vehicle for growing your money. Here are a few stock market strategies for beginners that might help:
1. Write down your long-term goals. Determine what you are saving for and how much you hope to accumulate.
2. Determine what risk level you are comfortable. Investment risk tolerance tends to decrease as someone’s gets older. Certain investments will carry a high amount of risk, while others are considered more conservative and carry low risk (but may have a lower rate of return). Knowing your risk tolerance is vital.
3. Don’t get emotional when it comes to investments. Stocks continually rise and fall. If you become emotional and start to think irrationally every time a stock price falls, you may put yourself at risk for bailing early and not reaching your long-term goals.
4. Know stock market basics. Educate yourself before making your first purchase. Learn about financial metrics, how to select stocks and determine the best timing, know about stock market order types, and what types of investment accounts are available to you.
5. Diversify your investments and don’t put all of your eggs in one basket.
These are just a few tips on how to invest in stocks for beginners. To learn more stock investing tips, browse through my financial blog at www.Mattloganinc.com or set up an appointment to discuss more!