Hello again Gilda,
Thanks for your interest.
Investing in the stock market is easy. Getting good results is the hard part. To succeed, you have to keep it simple and invest in companies you like and whose business you understand well.
When you buy a company's stock, you become a shareholder (understand "part-owner") of that company. You only make money if the company grows and does well financially.
Companies' stock prices fluctuate all the time due to:
- The law of offer and demand (shares continually change hands as people buy some or sell their stocks everyday on the market). Companies whose stock is in high demand will rise in price. Companies whose stock is heavily sold will lower in price.
- The consumers' general mood and confidence in the market (and in the future).
- The company's reputation, its balance sheet and the quality of its products or services.
- Geopolitical events (that's why investors keep reading the news everyday).
There are several ways to make money on the market. The most common ones are:
- By trading (long or short term): buy low; wait; sell higher and pocket the profit.
- By keeping a stake in a solid company that distributes cash dividends to its stockholders: you get paid to hold on some stock (this is my personal favorite).
Besides stocks, you can also purchase instruments like
funds to follow a market trend or a particular sector of your choice instead of an individual company. Both strategies work. I personally like mixing funds and individual stocks for my own peace of mind.
I do all my trading via Bank of America. Your own bank probably offers online brokerage service too. You'll just have to fill up some paperwork first if you want to get started.
A few things:
1. Get
financially sound first (if you're not already)
2. If not done yet, build a hefty savings cushion before you even start dropping money in the stock market. Cash is always king when things start going south...
3. Don't follow the hype: do your OWN research.
4. Ignore all "get rich quick" baits to sign up for online services, DVD courses, trading robots or any BS of that kind. They all require a join-in fee and promise you marvelous results. It's a waste of time and money.
5. Consider
mutual funds to mitigate the risk individual stocks inherently have.
6. Avoid penny stocks like the PLAGUE. I repeat: avoid penny stocks like the PLAGUE.
7. Only invest money you could afford to lose (because it may happen). As a rule of thumb: don't invest so much in stocks or funds that you end up losing sleep at night. Keep some cash.
8. Accept making mistakes in the beginning. There is a learning curve in investing, just like anything else in life.
9. Don't panic, whatever happens. When it comes to investing, time is your friend, especially if you start young.
10. Learn what compounding means (hint: the science of allowing money to grow by itself!)
11. Making money when the market falls is also possible. It's called
shorting the market.
12. You may be scared to pull the trigger now, like with all new things that require stepping out of your comfort zone. You'll see that the initial fears vanish once you actually get started. Just start slow.
In conclusion, if you really want to do it, then put your mind to it and don't procrastinate. You'll grow from the experience and might discover new things you had no idea existed before. The market is an organic, living entity. It's a human experience as well as an economical one.
