A step by step guide to investing in stocks for beginners

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Deciding to invest is one of the best decisions you can ever take in your life and investing in stocks will offer you an opportunity to make your money create more for you while you’re sleeping

Do you need to discover the secret to making a lot of money through stock investing? If yes this article is for you

What is stock investing?

Stock investing refers to purchasing a share in a company to receive dividends, when you buy a share you own a certain proportion in that company

It is a way of becoming part of the owners of the company and you’re entitled to receive dividends

What are dividends?

Dividends are the profits that are made from shares that are sold by a company

Why invest in stocks?

Stock investing offers you an opportunity to make you money create more money for you; this is through earning dividends or your stock appreciating in value

Why should you not keep your money in cash?

Money losses value over time, it is affected by inflation due to the general increase in the price level of goods and services

So a dollar today is not equivalent to a dollar next year

By just saving money without investing it, your money losses value

This is the main reason why investing is very important

So what can you do to prevent your money from losing value?

Invest invest invest 1000 times

Where should you invest your money?

These are the best investments:

  • Stocks
  • Real estate
  • Yourself
  • Business
  • Index funds etc

But in this article, we are only concentrating on stock investing

You should invest your money into something that will generate profits in the future; the return of investment should be high but with less risk of losing your money

Stock investing offers you this opportunity, you will receive up to 3% dividend from the money you invest in stocks, this is higher compared to the amount of interest you will earn by saving money in your bank account

Most banks will pay you less than 1% interest and the inflation lever is up to 2.5%

This means that by keeping your money in the bank, it loses value by 1.5% which is a lot

So stop keeping your money in the bank account, instead invest your money in stocks

Stocks are assets that are guarantee to bring positive returns in the future; this is why stock investing is my long term choice

Why should you not save money in a bank account?

How do you stop your money from losing value?

Investing is the best way to stop your money from losing value but you need to know that every investment involves taking the risk

And stock investing is not that different; you can either make money or lose money

All you need is to invest in assets or investments you know and trust, invest in companies that have consistently paid their shareholders

How do you make money from stock investing?

By investing in stocks, you will receive up to 3% dividends each year, assuming you invest $1,000 today in 2021, if you don’t withdraw your dividends you will receive

Amount= 1000(1+003)^10

            =$1,343.9

In 10 years, your stock will have generated $343.9 in dividends

This is the power of compound interest; your money will accumulate over time

Besides earning $343.9 in dividends, your stock will have appreciated in value, it will be worth more than the amount you bought it

Comparing saving money in your bank account to investing in stocks, which is better?

Most banks will give you less than 1% interest, while in stocks you can earn up to 3% interest

So comparing the two, if your risk-averse saving money in the bank account is for you, but the interest you will earn is very little because your money gets affected by inflation

If you’re a risk-taker and interested in investing for a long time, stock investing is for you, you will earn money in form of dividends and stock appreciation

How do you buy a share? How do you start investing in stocks? Where do you buy shares?

Stocks are not bought directly from companies but there are stock brokers which help connect companies and individual interested in buying a stock

All you have to do is to open an account with these online brokers and start investing

The best online brokers to help you start investing in stocks are robinhood, webull, and public

You can also invest index funds using a platform called vanguard

So before starting to invest you need to invest in companies which you believe that they will perform well in the future, those companies should have paid their share holders consistently over 10 years

You need to look at their financial statements to analyze their past performance

How do you choose which stocks to buy or invest in?

You can choose to invest in individual stocks or index funds, individual stocks are very risky compared to index funds

So before investing you need to first know your risk tolerance and the time you want to invest in

For example if your risk averse invest in index funds because your money is invested in several companies and if one of the companies performs poorly, gains will other stocks will compensate the losses

Stock investing is best for individuals who are investing for a long time; it is not for people interested in investing today and cashing out your money tomorrow

So be prepared to keep your money in the stock without selling it for a long time, this is when you will make the best profits

What are index funds?

Index funds is where you invest your money in stocks of several companies like the S&P 500

This is done using a platform called vanguard

Why index funds?

Investing in index funds is easy and there are many companies to choose from like the S&P 500,

Index funds offer you an opportunity to reduce the risk that comes in stock investing by diversifying your portfolio

Is investing in index fund risky?

All investment require taking a risk, you can either lose money or gain money, this will depend on many factors that are prevailing in the long run,

The stock prices keep fluctuating from time t time, you need to be prepared to invest for a long time, if you want to cash in your money next week, don’t invest in stocks

Invest in stocks foe years

During a recession, the stock prices will go down; this is the best time to buy stocks because most people fear to lose money, so they begin to sell

You just need to know that a recession is a temporally situation which so often happens in the trade cycle

When prices are high, this is not the best price to buy stocks; it is the best time to sell

You need to buy stocks when prices are low and sell when prices are high for a profit

How much money do you need to invest in stocks?

You can invest any money you can starting at $1 but the large amounts you invest, the more benefits/ dividends you will enjoy

The best platforms to start investing in stocks include robinhood, webull and vanguard

How does the stock market work?

What is a stock?

A stock is a financial instrument that signifies ownership of a company in a given proportion, ownership of a stock means you own a certain proportion of that company, if the value of the company  increases, your stock value will also increase

Why do companies sell stocks?

Selling stocks enables companies to raise large amounts of capital to grow and expand their business

How do companies list shares?

Companies list shares through Initial Public Offering and the company moves from being privately owned to publicly owned

Once company shares are listed, individuals or companies can start buying them

Stocks are traded in the stock market, and the stock prices of a share depends on its demand and supply of that stock

Why do stock prices keep fluctuating?

There are many factors that makes stock prices to fluctuate, this depends on the demand and supply of the stock, it can also depend on external factors like political environment

If many people are buying a stock at the same time, the price will increase while if few people are buying, the stock prices will go down

Where do they sell or buy stocks?

Stocks are bought in the stock market, there are online brokers that help connect individuals and companies selling stocks

The best brokers include robinhood, webull and public.

Why invest in stocks?

Stock investing offers you good value for your money, you money will create creating more money passively through dividends

Most stocks offer a dividend of up to 3% which is not so common with banks

How do you get started with stock investing?

Join an online broker by opening up an account with them

The best online brokers we recommend are Robinhood, webull and public

Conclusion

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