Over the last decade, I’ve shared as much helpful info as possible whenever a reader asks about growing wealth by diversifying their portfolio by invest in stocks.
But guess what?
I just remembered that I should publish something (no matter how small) on my website.
So, if you have any questions about stocks, please see my answers to six of the most frequently asked ones below, and feel free to reach out if you have any more questions.
What are stocks?
They represent ownership in a company, often called “shares” or “equity.” They’re an essential component of many investment portfolios and carry varying degrees of risk.
Why do they matter?
Investing in them is a way to build wealth and diversify your investment portfolio. People invest in stocks primarily to earn a return on their investment. And this can happen through an increase in stock prices or dividends paid by the company.
For example, if you buy a stock at $1 that grows to $5 over the next 12 months, your initial investment would have increased by 500% during that period. If you sell at $5, you get a 5x return on your money. But if you hold onto those shares, you could still earn increasing passive income through monthly or quarterly dividends from the company.
Who can purchase stocks?
The minimum age requirement to open an account for stock trading varies by state, typically 18 or 21 years old.
Where are stocks traded?:
Stocks are primarily bought and sold on stock exchanges such as the NASDAQ or New York Stock Exchange (NYSE). Buyers and sellers trade assets on these exchanges.
When can you invest in stocks?:
You can invest in stocks at any point in your adult life.
However, holding stocks for the long term is more likely to yield significant returns. Understanding market trends is also crucial when considering your investment strategy.
The more clarity you have on how market trends could affect a stock’s short and long-term performance, the more dialed in your investments are.
How can you invest in stocks?
You have several options, depending on your situation:
- You could utilize your company’s retirement plan (for example, a 401(k), which typically includes a mix of stocks and bonds).
- If your company doesn’t offer a retirement plan or you’re self-employed, consider an Individual Retirement Account (IRA), which usually contains stocks.
- Explore individual brokerage accounts for more control over your investments. Research your options, considering factors like support for stock selection, investment advice, access to human assistance, associated fees, and more.
I hope this helps.
The good news is that whether you’re after passive or active income, stocks are always available to be traded and invested in by anyone, regardless of income level.
But before diving in, I encourage you to watch this training video that would help you change your mindset.
And study and practice often to see how this works from a dollar and cents perspective.