The Breakdown: The Basics To Buying & Trading Stocks 101
Believe it or not, in 2020, buying and trading stocks shouldn't still be a foreign thing to the Black community as it once was. Now more than ever, technology, podcasts and even blogs, just as this one, are making it easier to invest. The information is out there, you just have to pay attention to it.
Not privy to stocks, bonds and investing? Check out this breakdown to get you started on the right track to buying and trading stocks:
How to get started?
Apps like Stash, Acorns and Ally are great for a simple setup of an investment account. I personally use the Fidelity app where I can see my retirement investments and personal stocks all in one place. Simply download and follow the directions to get started!
What are stocks and bonds?
First thing’s first, a stock is a form of security that indicates the holder has a portion of ownership in a corporation. In short, it’s money you’re putting into a company to help them keep their wheels turning. In return, you are getting back a portion of their profits when their stocks start to rise. This can come in the form of dividends or the payout when you sell or trade the stock. Think of it like this, when business is good, stocks go up, when business is bad, stocks go down. With that being said, you could very well lose money, so it’s important to pay attention!
Bonds on the other hand are debt obligations and are a form of borrowing. If a company issues a bond, the money they receive in return is a loan and must be repaid over time. Just like the mortgage on a home or a credit card payment, the repayment of the loan also entails periodic interest to be paid to the lenders aka, you!
Trading vs. Investing
When you’re trading you are buying stock for the sole purpose of selling it quickly. This means you already know what you’re getting into as far as the company and can foresee its stock going up. For instance, Kylie Jenner just signed on to sell her cosmetic line exclusively at Ulta. If you’re a smart investor you’ll take up some stock as she is very popular and you know the holidays are coming, so that stock is going to skyrocket then go back down after the holidays. You’ll want to sell just after Christmas.
Investing, however, is pretty much for the long haul. Stocks like Apple who consistently reinvent themselves or bonds are generally the investments you’ll want to hold on to for a few years, then cash in on them when they’re nice and lucrative.
Is there a risk?
When it comes to investing there is always a little risk involved. The stock market could crash which means there could be a sudden decline in stock prices across a significant cross-section of the market, resulting in a drastic loss of paper wealth. Crashes are driven by panic as much as by underlying economic factors. So, in lieu, always read up on daily news, never put all your faith or money into one company and pick an investment you’re knowledgeable about.
