Learn to invest (step by step)
Introduction
If you've been wondering how to invest and want to learn the basics of stock trading, this guide is for you. You'll learn how stocks work, how to buy them, and how to diversify your portfolio so that your risk is minimized while still making profits.
What is a stock?
A stock is a share in a company. You can buy a stock for as little as $1, which means that you own part of the company and get paid if it does well. The price of a stock changes over time, but there's usually some reason why it moves up or down—like when earnings are released or a new CEO takes charge.
The price of a stock is determined by how much people want to buy or sell at any given point in time. If there's more demand for something than supply, then the price goes up; if there's more supply than demand, then the price goes down.
Stocks are NOT risky.
I’ve heard it over and over again: “stocks are risky!”
But the truth is that stocks are not risky. In fact, they’re an excellent way to build wealth for long-term investors who have a time horizon of five years or more.
The average annual return on stocks has been around 6% per year since 1926, while bonds have only yielded a measly 2%. This means that if you had invested $1,000 in the S&P 500 when it was first created in 1923 and reinvested all dividends (which were taxed at 15%), your investment would be worth over $30 million today!
How do I know what company to invest in?
To make sure you're investing in the right company, look at companies that are growing. You can also look at companies with a good business model and a good management team. Some people like to invest because they like the company or its products, but don't forget that what matters most is whether they can make money by investing in it.
Sometimes when you look at stocks, you'll see that some have a higher return than others do. For example, if one stock has made $1 and another has made $10 over the same period of time (say two years), then obviously we would want to invest in the stock that made more money for us! So this means we should always compare how much profit each company makes before deciding which one we want to buy shares from them - otherwise all our investments will just be based on how nice we think these businesses might be rather than whether or not they're actually worth buying from!
If an investor wants more control over their portfolio then there are other options available too such as mutual funds which let investors pool together their funds into one large fund managed by professionals who manage investments professionally instead of trying doing it yourself - this way if something goes wrong then everyone loses together instead of just one person losing everything while everyone else gets away scot free! These types of investment strategies allow individuals access into markets otherwise unavailable through traditional means due to minimum investment requirements; however these types can come with additional costs associated with fees charged by fund managers/brokers as well as taxes owed upon withdrawal (if applicable).
How long should I hold onto the stock for?
You can hold a stock for as long as you want. There is no rule that says you must sell your shares after a certain amount of time. You could theoretically buy a stock and hold onto it forever if you wanted to!
The only reason why someone might want to sell their shares is when they are unhappy with their investment and want to get out of it as quickly as possible (usually because the company has done poorly or has been accused of wrongdoing). Your decision to sell should be based on whether or not the stock’s performance aligns with your expectations, but not just because there was one bad day where its price went down by 10%.
Diversify your portfolio.
Your portfolio should include a range of different stocks and other investments. You can diversify by buying a range of different stocks, or you can diversify by buying different types of stocks (for example, international versus domestic). Diversifying also means choosing companies that are in the same industry but not competitors, as well as buying bonds from different issuers.
Diversifying your portfolio reduces risk because it means that if one investment declines in value, another investment may be doing well to offset the loss. This is particularly important when investing in individual securities such as stocks and bonds rather than mutual funds where all investors are impacted by factors such as rising inflation or interest rates at the same time.
Stock investing is easy and can be fun.
If you're reading this, I bet you've heard a lot of bad things about the stock market. It's too risky, it's too complicated and it's just not worth the effort. I'm here to tell you that none of that is true! You can learn how to invest in stocks easily while also having fun and learning something new.
When we think of investing, we often imagine a professional sitting at his or her desk trading shares on their computer screen. In reality, there are plenty of ways for everyone from beginners to experts to get involved with investing in stocks.
Conclusion
I know it's a lot to take in, but the best way to get started is just to jump in and do it. You never know until you try! You can start by looking for companies that are doing well, buying some shares of stock and holding onto them for as long as you feel comfortable with. If you're not sure about how long is "long enough" then we recommend sticking around for at least 6 months before selling off any shares.
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Thanks to all subscribers,
Adrian D.
