Tag Archives: stock market

I Bought Stock Some Stock and You Can Too

May 2, 2014 Stephanie Cangro Leave a comment

Confession: I’m completely clueless when it comes to anything financial. While I understand the basic idea of living within a set budget, numbers just aren’t my favorite language. NASDAQ? 401(k)? I prefer romance languages and speaking in sample sale.

But while savings and investments won’t provide me with the instant gratification of scoring a really great pair of shoes at a good price, I do realize that they are important to understand and think about. The younger you are and the earlier you start, the more you stand to gain. Think about it–when you’re younger, you have a little bit more freedom to be both selfish and risky. Yes, it hurts to tuck away money when your paycheck can barely cover the essentials and your tax refund has the potential for so much fun, but starting to invest early allows you to be more adventurous and, potentially, reap more in rewards. With all this in mind, one of the goals I set for myself this year was to figure out the basics by investing a small amount in some fun stock.

It took some time and research, but I finally figured out how to begin and manage my tiny portfolio in a simple manner that I’m comfortable with. And, trust me, if I can do it, you can too! Fair warning though: the process I used it pretty much the furthest thing imaginable from anything seen in The Wolf of Wall Street. I doubt I’ll be rolling in Jonah Hill-esque money anytime soon, but I’m ok with that.

If living like Leo is your goal, you might want to stop reading now (and maybe check on your morals). But here’s a How To guide of process that I used and found comfortable for investing a small, budgeted amount (in this case, my tax refund) on my own:

Step 1. Google “How to invest in stock.”

The obvious disclaimer here is that you can’t trust everything you read online. But with some browsing and clicking, I was eventually able to find this article from CNN Money that was filled with tons of great, easy-to-understand information; it was the perfect compliment to Sara Hamling’s The Stock Market, published earlier this month. While I definitely recommend reading both articles, these are some of the highlights that I found to be particularly helpful:

A smart stock portfolio will include stocks from several different industries. This way the portfolio is somewhat protected if one area of the economy takes a downturn.
It’s smarter to think ahead and invest in purchasing stock that has the potential for long-term growth.
There’s no set standard or magic formula for stock evaluation – different brokers will evaluate stocks based on different formulas, but the most important thing is to feel comfortable with the company’s profile and potential. Generally speaking, large companies will offer stable, but small, returns, while smaller startups offer more risk and (potentially) higher returns.
Stock can be purchased from three different types of vendors: Full-service brokers will execute your stock orders while also offering their expert opinion, making them they most expensive option – you get what you pay for. The other two options are discount and online brokerages, which require you to do the background research on your own.

Step 2. Research online brokerages

Because I was only going to be making a petite initial investment and, partially, because I’ve always had the impression that trading stock in person involves a lot of pushing and yelling, I decided to look into using an online brokerage. I won’t lie, this was super scary. Some sites, like E*TRADE and TD Ameritrade, seem like they have great deals on the surface, but the fine print makes it clear that a substantial upfront investment (think +$10K) is required; others offer great terms and fees to their existing banking customers, but little incentive for outsiders.

Confusion regarding which site to use was definitely not something I had prepared for, so I did what I always do when feeling utterly and completely let down by the Internet/real world – I asked my friend Gina.

Gina is one of those magical people who always seems to be able to give the exact right advice (If you don’t have a Gina, I really recommend getting one ASAP. I found mine in college, but maybe try your favorite coffee place?). Fortunately for me, Gina has recently been doing some experimental investing on her own and pointed me to Sharebuilder.com. This site, which is geared toward small time investors like myself, proved to be exactly what I needed – there’s no minimum requirement to begin and each trade costs $6.95.

Step 3. Research your (potential) stocks

Once I had setup my Sharebuilder account, I need to figure out which stocks I actually wanted to purchase. Though my overall goal was to have fun throughout the process, I still wanted to try to protect my initial investment; this led me to decide on investing in a larger company, despite the fact that it would mean purchasing fewer shares.

Once this decision was made, I set about making a list of companies and brands that I happen to enjoy or find interesting. For me, this included Facebook, Twitter, Disney, Dreamworks, Time Warner, Yahoo, Netflix, and Apple. I then set about researching the stock prices and predictions, using Google and Sharebuilder’s provided tool. Ultimately, I decided to split the difference between protecting myself and taking bit of a risk, and narrowed my selection down to Disney and Yahoo.

Step 4. Place your order

Once I decided what to buy, I logged into my Sharebuilder account and placed my order; on my budget, this came to two shares of Disney, three shares of Yahoo, and, since I had a little extra, two shares of Dreamworks. Small potatoes, but it’s a start. The whole ordering process was just as easy as online shopping – which, it a sense, it is.

Step 5. Keep going

Moving forward, I plan to monitor the performance of my stocks and learn as much as I can from their performance. This includes reading up on Sharebuilder and seeking out additional articles. And, when a term is used that I don’t understand, I’ll just look it up. Ultimately, I hope that I can learn enough to expand on my earnings, reinvest profits earned, and even feel confident enough to get into some mutual funds.

Sounds pretty easy peasy, right? Here’s hoping.

Photo by Rob Adams

Money

The Stock Market

April 3, 2013 Sara Hamling Leave a comment

Well friends, it’s time for the stock market. If you’ve read the other articles in my Finances in Your 20s series, hopefully you’ll have learned how to budget and how to save money for a rainy day. Those concepts were probably at least somewhat familiar to you—but the stock market may be something completely new and completely terrifying. It would be impossible for me to delve into everything you would want to know about investing in the stock market in this article, so I want to give you an overall framework for how to start the process and point you on your way. There are endless resources out there, so if there’s something you want to know that I don’t cover—you know the power of Google. Let’s get started.

What is the stock market?

The stock market is a general term for one of the various markets (like the New York Stock Exchange or the NASDAQ—don’t worry about the specific markets, it’s not crucial) where you can invest your money in companies. The stock market allows companies to sell shares of stock to the public. When you purchase a share of stock you have a (very small) slice of ownership of that company, and have rights to the potential gains or losses based on that company’s future performance.

Not everyone in the stock market is a rich, corporate day trader who follows the stock market on a daily basis. If you don’t have the time or money for that, don’t worry: neither do I. But if you are saving money that you don’t think you’ll need in the next 5–7 years, you should definitely consider putting it in the stock market.

How do I know if I’m ready to put money in the stock market? Do I need to open a new account?

If you are contributing to a retirement account (401K, IRA), then you’re already ready to start.

You should be able to put the money you’re contributing into stocks, bonds, mutual funds etc. through the account you already have open online. Most retirement plans allow you to invest in individual stocks and many different stock-based funds. If you haven’t already logged into your retirement accounts online, take the steps to do so. Until you actively put that money somewhere, it will be sitting around making even less money than your savings account.

Once you have financial stability—when you have about 6 months of expenses in your rainy day fund and are contributing to your retirement account—then you should consider opening a separate brokerage account.

If this is the case, then good job you! So, a brokerage account is just an account with a brokerage firm (Vanguard, Schwab, Scottrade, Fidelity, eTrade etc.) that allows you to invest in stocks, bonds, mutual funds, ETFs, CDs or even commodities (like gold or oil). I can’t go over everything involved, so here is some help to opening your first online brokerage account. Look at any fees brokerage firms may have, how much they charge per trade, and any minimums to open an account or to be invested in funds.

Since this account is on top of your retirement account, you may be wondering what this money is for. Well, that depends on you and your goals. Want to buy a house? A new car? Plan to go to grad school eventually? Want to take a year off and travel the world? Figure out your goals and use that as a time-frame for how risky you should be with this money, based on how soon you are going to need it. (What we’re working on is asset allocation. Become familiar with the concept.)

What should I invest in?

Because individual stocks can fluctuate so much, I suggest putting your money in funds like Mutual Funds, Index Funds and/or ETFs (Exchange Traded Funds). While all these funds are different, they are alike in that they group many companies (and other securities) together which allows you to have a diversified portfolio even with a relatively small amount of money. What this means for you is that you’re not subject to the random ups and downs that an individual company can have because your money is spread widely across hundreds of companies even though you’re only invested in a single fund.

Until you are comfortable with the stock market, it’s probably best to put your money in a couple of broad funds (like a total stock market index fund) and let the market take its course. In other words, don’t try to time the market—put your money in and leave it. If the money you’re investing is for the long-term, the ups and downs of the market will even out in the long run.

Note: Don’t feel that you need to be overly involved in managing your funds. The more passive approach of investing in index funds is actually often more successful than investing in heavily managed funds that often don’t perform as well and charge more to manage.

What should I learn about next?

There is a lot to know about investing and this just gives you an overview of the strategy that I think makes sense for beginners. And because this is just a start, I’m giving you a list of things to learn about next so that you’ll feel familiar with these terms when you come across them: Expense Ratios, Making Money with Dividends, Asset Allocation, Diversification, Rebalancing, and Stock Sectors.

I know, those may sound scary too. But I promise, the sooner you gain a basic understanding of these concepts, the easier this whole “stock market” thing will be.

Photo by Meaghan Morrison