The purpose of this article is to give a definitive guide on How to Invest in Stocks markets.
Let’s say you might think of investing in stock and share, and building long-term wealth for yourself.
But you don’t know where and how to start!
Here are effective ways to invest in Stocks and Shares markets to help you meet your greed.
What Happens to My Money Over Time?
if you know about economics, you might know that your money losses its value over time. It is due some something weird called inflation. Inflation is the rate at which the general prices for everything increase each year.
Inflation is generally around about 2% – 2.5% market. That means every year goods cost about 2%- 2.5% more than they did the year before. For example, in the 1990s a Coca-Cola can cost less than 0.5 cents, but in 2020 same cane cost about 0,8 cents.
let’s say you have $1000 right at the moment, and for the next 10 years you store it somewhere, and you never look at it again. in 10 years, time your $1000 is not going to be $1000 anymore because everything will be increased by 2%-$2.5 every year, so the value of your money will fall.
So, if you keep your money as said you will lose money over time which you don’t want to go that way. even if you put your money in a savings account in a bank which may give you 0.2% interest yearly, you still lose money because of the 2% inflation.
How Do You Stop your Money from Losing Value Over Time?
The answer to that is straightforward. if you have a very good and huge savings account, for example, one with an interest rate of 2.5% (most the interest rate less than 1%). So, as everything and services go up by 2% each year because of inflation, your money also increases because of the high-interest rate. Thus, practically it counters inflation and you won’t lose money.
It is only an imagination because as said nowhere in the world pay that high-interest rate to anyone. So, you have no other choice either sit back and watch your money wash away, or do something to counter the loss.
And the only way to stop losing money is to earn money. That brings us to the 3rd point.
Invest in Stocks and Shares to Make Money?
As I talked about in point number two. if you have hypothetical savings account with a hypothetical
interest rate, you can stop losing money. But does an interest rate of more than 1% exist at all?
The answer is already clear to you. “Absolute NOOO”
There are multiple ways to make money. For example, you can earn money online, and we have a separate article on that too. But the most valuable and easiest step to Invest in Stocks and Shares
What is Investment?
Investment is the process of investing money for profit. In other words, investment is the action that puts money in your pocket.
For example, let’s say you buy a house and then rent it out to people. So, there are two ways you are making money. First, you charge some bucks for those who live in the house over the years. It is good because in 10 years you earn back at least 10% of the money you paid to buy the house.
Secondly, the money you paid off to buy the house is an investment. And probably the value will increase over time. As result, the house will be worth way more than you paid off in the first place.
So, in both ways you made money.
But buying a house requires a very large of money, and not everybody has that money to invest. So, how you can invest with little money and almost no effort?
That brings us to the next point – investing in SHARES and STOCKS.
What are Stocks and Shares?
It is a portion of a larger amount that is divided among several people. Basically, to earn money from shares and stocks to provide value. And in this context, the way that we provide value is by offering up our money. Providing money and investing in service is in a way giving a form of value.
And so, when providing your money to a company in the form of buying their stocks, you would get some kind of return for that investment.
So, If you have any sort of savings, and your money is just sitting in the savings account, it is earning 0.01% interest per year. It is not doing much for you. Whereas, if you put them in stock and shares, you potentially be earning passive income from that. It would be much better for you than sitting in the bank.
For most beginners as a non-financial advisor, I recommend, or at least the thing that I do is invest all my money that’s in stock and share in index funds. An index fund is something like the S&P 500.
And when you invest, let’s say $1000 in the S&P 500, that means that your $1000 is distributed amongst the top 500 biggest companies in the US. Basically, for all the big US companies you have heard of, you end up investing in all of them a little bit at a time.
How do I Buy Stocks and Shares?
Previously, if you had to buy a share and stock you had to call a person or company which we called stockbrokers. But now thing has gotten much simpler and easier with the arrival of online stock platforms. It means you no longer need to call a person to do the job for you.
Whatever country you are in just google the phrase “best stockbroker platforms” and you would probably find a lot of them.
Does that bring us to the next point which is Isn’t investing in stock and share risky?
Isn’t Investing in Stocks and Share Risky?
Generally, there is a common debut among people that investing in stock is risky. You at least also may have watched on the news or heard that a particular person lost his entire money in stocks.
So, for example, you may think investing in real estate is safer rather than stock, and I should probably buy a house instead. But what you don’t know is that investing in real estate could be as risky as stocks. the only way to lose money in anything is if you buy a thing and then sell it for less than you bought it in the first place.
For example, let’s say you buy a house for $500’000, and on the next day the Covid crisis happens, then suddenly the house price plummets. Now the house you bought is worth $250’000.
Suppose you decide to sell your house, you are now losing $250’000. Similarly, the only way to lose money in stock is to buy a stock at a certain price and then sell it for less than you originally bought in the first place.
When Should I Begin?
So, the next confusing questions are, when should your start? is it enough to invest in stock? Is it too late, or is it too soon?
The answer to that is very straightforward. The sooner you start investing the better it is. It does not matter at all how much do have or how old you are.
But before you begin consider the following point as fundamental to your investment.
- Make sure that all your high-interest I.e debit or credit is paid. Because you may lose more money due to high interest than making it from investment at first.
- Keep some money aside for emergencies. It does not matter whether you keep cash in the bank, but put some money separately, so you could use it in emergencies rather than taking out the money from your investment.
- Don’t invest the money in stock you might think you need to use for the next 3-4 years. Let’s say you buy a car or house and you need to pay the mortgage. Don’t invest that money into stock and shares.
How Much Money Do I Need to Begin Investing?
It does not matter how much money have to begin investing in stocks and shares. Start with whatever you have in hand considering the three points we talk before.
You can start as low as $10 depending on the country and services you use. But the whole idea is to begin the sooner you can. you can do some research about where and what you might start investing.
If you are still interested to invest in stocks and shares, let’s talk about the final question “how do you start.”
How Do I Start Investing?
The answer is easy and simple. You can start by online stockbroker platforms. What you need is to find the right platform that suits you. You can do it by searching the key phrase “Invest in Stocks and Shares” on google to find what is best for you depending on your country.
In the USA most people use Vanguard and Betterment. And in the UK and Europe, people use Freetrade and Vanguard.
So, the whole idea is to find the best option for yourself.
See you in the next article.