Investing consistently in stocks can be very profitable. However, you must remember that every day in the stock market will not be a good one. You must be willing to sometimes ride it out when the market is down.
This is an example of how a person can make money with stocks. Let’s say you own 100 shares of an index fund or a stock and it goes up $1 dollar per share for the day. You have just earned $100. But let’s say you own 500 shares of that fund or stock, then you have just earned $500 for the day.
DISCLAIMER: This article is for educational purposes only, not advice. There are no guarantees about which way a stock or index fund will move. You can lose money. Sometimes the market goes up. Sometimes it goes down. Read and learn as much as you can about the stock market, talk to a licensed financial and tax advisor, do your research and pay attention to fund fees.
Never invest money that you cannot afford to lose. And don’t put all your money in the stock market. You should keep some of your money in a savings account for emergencies.
Warren Buffet is one my favorite people to listen to. There are inspiring interviews with him on Youtube. You may want to search for him there.
– GETTING STARTED
Open A Brokerage Account.
First you will need a brokerage account. You can easily open a brokerage account with a reputable investment firm online. You can start investing with your employer’s 401K plan, but usually those plans have fewer investment options.
An index fund allows you to invest in hundreds of companies at one time which helps to spread the risk. This may be a great way for you to start. Check the expenses/fees for the fund. I prefer index funds that charge .08 or less. The lower the fee, the better your profits.
If you decide to buy individual stocks, don’t put all your money in one stock. Spread the risk as much as possible and do your research.
– DO YOUR RESEARCH
I like to use Morningstar and Yahoo Finance to research stocks. However, you can Google “Research Stocks” to find other websites.
These are the things I always look at before I buy a stock or index fund:
I check the performance of the last 10 or 15 years (I never buy a stock or index fund that does not have at least a 10-year history).
I check the fund’s financial page to see if their earnings have been going up or declining.
I check the analysts’ suggestions.
I check for news stories to see if there is anything negative.
I check the P/E Ratio. According to Investopedia, “The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.” I prefer that it be no more than 25 but I have sometimes chosen companies that have a higher P/E because of their growth information.
Also, I check to see if the fund pays a yield/dividend.
Again, do your research and never invest money that you cannot afford to lose. Don’t put all your money in the stock market. You should keep some of your money in a savings account for emergencies. There are never any guarantees in the stock market. You can earn money and you can lose money.
If you come across a financial term that you don’t understand, you can Google it for the definition.
Read and learn as much as you can about the stock market. And do your research.