Investing 101: A Simple Introduction to Investing Your Hard-Earned Money
By Peter Hong
For most American families in the twenty-first century, the term investment does not frequently circulate in typical household discussions. In fact, when many even hear about the term, they are left questioning themselves and pondering for minutes at a time about the appalling thought of losing all the money they have. However, the investment world is not as frightening as it seems. If you take the necessary steps and dedicate time to fully understand this process, the buying and selling of shares will not seem as complicated. Furthermore, investing is an excellent way to accumulate wealth over time, but for most people, the question begs: how do I start? If you are interested in starting your own investment account or simply curious about the process, read the step by step manual below.
1. Determine Your Own Investing Preferences
Before diving in to this process, you must first acknowledge your own personal preferences regarding how long you will keep a certain stock before ultimately selling it. Many investors choose to invest with long-term goals in mind, while others operate on a short-term investment mindset. In addition, you must decide whether or not you will invest your money yourself in lieu of a financial advisor. Finally, you must become aware of the different investments that can be made in the market.
There are three main types of investments that make up one’s overall portfolio: the stock, the bond, and the mutual fund. A stock is the most common investment, and is essentially ownership of a very minuscule portion of the company that is being invested in. When you own a stock, you own a share of the company, and the value of it can fluctuate at any given time. Next, there are bonds, which are typically loans to a company or the government. The investor generally has the idea that they will be compensated in the near future and this compensation is typically greater than the initial amount of money lent to the entity because of the interest that is associated with these bonds. Furthermore, there are mutual funds, where a group of investors combine their money so that they can minimize risk and invest in a wider variety of stocks and bonds. Most often than not, these groups of investors work closely with professional fund managers, who makes the decisions about the investments made.
3. Open Your Own Investment Account
There are a number of methods in which an individual can begin investing. In regards to investing in stocks, one of the most common ways to start is by initiating an online brokerage account. These investment accounts are the perfect choice if you want to purchase and manage your own investments, and they enable you to buy and sell stocks through the broker’s website. There are many secure options to choose from regarding these types of platforms such as Fidelity, Vanguard, and Robinhood. From personal experience, using Robinhood was a great way to get going in the stock market, as this platform does not charge users fees for placing trades.
4. Keep Up With Current Events and Start Investing
To be a successful investor, you must keep up with the news daily to obtain a sense of what is going on in the world and in global economies. Keeping up with current events will tell you whether or not the price of a certain stock will depreciate and at certain times will alert you if there are any trends that may be occurring. At the end of the day, when investing your hard-earned money, you should always consider the company’s complete background because one small trend should not be the deciding factor of a purchase.