The stock market has dominated the news lately, with tales of GameStop and AMC making millionaires overnight. What you might not be hearing are the people who lost thousands of dollars, investing in the latest trending stock because of FOMO. You definitely can make money as an investor - here’s a guide to a getting started.
1. Research BEFORE You Buy
The #1 thing you need to do before getting into the market is research! Think about it - you’re spending your hard earned cash by buying a piece of a company. Before you click that buy button, take the time to do some googling - look at the stock price history, read related news about the company, and try to get a feel on how much risk you’ll be taking on. More than anything, the stock market is an information war - the more you know, the better equipped you’ll be.
2. Only Invest Your Spare Cash
The stock market can be extremely volatile, no matter how much information you’re armed with. A huge mistake that rookie investors make is to drain entire bank accounts in the hopes of striking it rich. This is dangerous for a number of reasons, but the main one is that you can lose everything. And, more than likely, starting out you will lose money. Don’t invest what you can’t afford to lose - this isn’t Shark Tank, and you can’t back out once you see the deal’s gone bad.
3. Consider Dividend Stocks and ETFs
On to the fun part - actually investing. Stocks are compiled into a bunch of different categories - growth stocks, blue-chip stocks, cyclical stocks. However, we’ll be talking about income stocks (aka dividend stocks) and ETFs, which can help you survive the ebb and flow of the stock market.
Income stocks is exactly what it sounds like - it’s a stock that pays you in a certain time frame. Some pay monthly, some pay four times a year, but you can sit back and make money, with no real effort required. The best part? The stock otherwise functions exactly like any other stock, where you can buy or sell if the price goes up or down. Huge, trusted companies like AT&T and JPMorgan Chase are dividend stocks, and in general these stocks are considered to be less volatile than most.
ETFs are like a huge combination of stocks - they track different industries, and have investments in a variety of companies and commodities, rather than just one. These are one of the safest choices to invest in for beginners because of their low volatility, diversification (which is important - you don’t want all your eggs in one basket), and variety of investment choices. There are a number of ETFs to look at, from technology to marijuana - if you have an industry you’re looking to invest in, there’s probably an ETF for it.
4. Talk to a Financial Advisor (the experts know what’s up)
Who says you need to go into battle alone? For a new investor, talking to a financial advisor is like having a superhero on your team - these are people who dedicate their time and energy into your money. This goes far beyond stocks as well. Financial advisors can help you build credit, manage debt, and even create a custom budget just for you. You can find a top, affordable financial advisor for young investors, and many banks offer complementary advising as well.
The four tips above will get you started, but they’re only the beginning. People spend their lives learning about the stock market, and it takes a lot of hard work. However, anyone can get started, and if you're looking to make another investment in your financial future, download Boro to get your spending, saving and credit building on track.