One of the best and most proven time-tested strategies for building wealth and a portfolio for the long-term is to buy stocks.
The Top Line
- Buying stocks allows you to own a share of a public company and earn gains or losses depending on the financial status of the company.
- You should have a strategy when investing in stocks and know whether your goal is to invest for the long- or short-term.
- Before investing, you should research individual companies or funds to determine which are the best fit for your goals.
One of the best and most proven time-tested strategies for building wealth and a portfolio for the long-term is to buy stocks. However, many people don’t have any experience with buying stocks. Ownership in the economy is one of the cornerstones of financial investing and saving for the future. To take advantage of the economic benefits of investing in stocks, you’ll need to learn how to buy stocks and add them to your portfolio. This brief guide will show you not only how to buy stocks, but the things that you will need to know for the future to protect yourself during this process. With trusted knowledge from a reputable source, you can ensure that you truly invest for the future and give yourself the best chance for success instead of putting yourself at added risk.
What Are Stocks?
Before you can feel confident owning stocks and investing in these assets, you should know exactly what they are and what it means to own a stock. To own a stock is to have part ownership in a company that is listed on the stock exchange. When you own a stock, you are entitled to a portion of its assets and profits. Stocks fluctuate in price depending on the performance of the company and the popularity of the asset. When this happens, people lose or make money according to which direction the price is going. Some people invest in stocks for long-term gain while others invest for mere minutes to take advantage of price action, along with countless investors everywhere in-between.
Benefits of Owning Stocks
There’s a reason that owning stocks is so popular and is a cornerstone of the investing and retirement savings strategy for millions of people. The benefit of owning stock in a company is that over time, the stock could increase in value and add to your portfolio. What starts out as a small amount, with regular contributions, could turn into a powerful force that increases your savings and wealth. However, stocks can also go down and cost you money. For this reason, it is best to pursue a diversified strategy or even enlist the help of a professional, also known as a financial advisor to help you form a solid strategy.
Stock Investing Strategy
For most people, it is not practical to manage their own portfolio and purchase individual stocks for their long-term savings. In general, stock market trading is not a safe activity for anyone that doesn’t know much about managing a portfolio. However, some people do decide to form a strategy on their own. This ranges from day-trading, dividend investing, and long-term investments in solid companies. It is up to the individual to determine the strategy when they purchase stocks on their own. For anyone that wants to enjoy consistent returns and not worry about it, it is recommended that you work with a financial advisor or other service that manages a robust and diversified portfolio to reduce risk and lock in consistent gains. Many investors find that investing in a stock index fund is a good way to diversify. Index funds are groups of stocks that you may purchase together so that you don’t need to purchase individual stocks. Some of the most popular stock index funds include the S&P 500 and Dow Jones. There are index funds for domestic stocks as well as international.
Steps to Buying Stocks
Now that you know the background of stock ownership, you’re ready to dive right in. Buying stocks is actually a pretty simple process, but many people are intimidated by it. There are many services that you can use to purchase and manage stocks that make it simple, fast, and free. Don’t stress about the concept of buying stocks--people do it every day.
Create a brokerage account
The first step to buying stocks is to create a brokerage account. A brokerage account is an account that you use to purchase, sell, manage, and view your stocks. You’ll be able to complete all account functions from your brokerage account. The most important step here is to find a brokerage that has all of the features that you’re going to need. It’s important that you partner with a reputable brokerage so that you can complete everything you need to without worrying about the safety of your funds.
Before you can purchase any stocks, you will need to deposit funds to your brokerage account. These funds will be used to purchase the stocks. To do this, you will need to link your brokerage account with a checking or savings account. Funds will be drawn from your selected account to fill your brokerage account and complete your stock purchases.
It’s not required that you do research before you purchase stocks and nobody will stop you from buying stocks before you have done your research, but it is considered to be a very important step by anyone who is giving good stock advice. Part of being successful in buying stocks and investing in companies is doing research to determine which stocks will be best for you to purchase. When you do more research and choose carefully which stocks you consider buying, you will almost always have more success with your strategy and learn valuable knowledge that you will use when making decisions in your investing career.
Once you have completed all of these steps, you are ready to complete your stock purchases. Buying stock is an important step for anyone that wants to enjoy the benefit of consistent gains and increasing the value of their portfolio, and by doing the work required to get yourself prepared for this, you can enjoy even more success. Purchasing stocks is as easy as entering in the ticker symbol into your online brokerage, selecting a quantity, and purchasing the stock with the buy button. When the order is filled, the stocks will appear in your account.
Use Caution When Purchasing Stocks
One thing that you need to be aware of when purchasing stocks is that stocks can go down just as easily as they can go up. It’s important to exercise caution when purchasing stocks and make sure that you have done the relevant research. For most people, it is best to partner with an adviser that can form a responsible trading strategy or to consider index funds that will group stocks together and provide more diversity.