You can certainly find a gazillion articles online about how to invest your money wisely, but if you’re truly inexperienced, you may be left with investment questions so basic you’re afraid to ask them. Never fear: every hotshot investor was a beginner once. Here are a few straightforward answers to get you started.
What Exactly are Stocks?
Whatever they are, you know your bank doesn’t sell them, and that’s the only place you go to handle money. So how do you “get into the stock market”? First, a quick explanation of what a stock actually is: Companies can choose to be either private or public. We won’t go into the whys and wherefores of that right now, but what you need to know is that only public companies sell their shares in the stock market. Shares of stock are little chunks of ownership of the company.
Where Do I Buy Them?
You get ready to buy stocks by opening an account at a brokerage. Starting this account is similar to starting a bank account: You’ll give them some information about your identity, then make an initial deposit that’s actually a cash transfer from your bank. (You can’t use your credit card to open a brokerage account.) While some of the older brokerages such as Charles Schwab still maintain physical locations, all brokerages are now online. Two of the very best ones for complete beginners are OptionsHouse and TradeKing. They provide lots of introductory material and handholding, and teach you step-by-step how to proceed once you open an account.
Can I Invest in the Stock Market at a Really Tiny Level?
You hear plenty of tales about people winning or losing huge amounts in the stock market, but what if you just want to get your feet wet by starting small? It may be embarrassing to ask whether you can buy stocks with $50, but it’s a totally reasonable question. The answer is “Yes,” but you might pay more in fees than you earn. Most brokerages have a minimum starting deposit of at least $500 or $1,000, but a few like OptionsHouse and TradeKing have no minimum account level. However, you will have to pay somewhere between $5 and $10 each time you buy or sell stock, so that eats up your profit if you only invest $50. However, it’s sometimes possible to find a promotion offering free trades. Once you log onto a reputable brokerage site and start reading, the unfamiliar vocabulary will start to make sense.
Learning about investments is actually pretty interesting, and it’s a good stepping stone to a financially secure future.