As a young investor, you can learn a lot about the stock market when you buy stock in a company.
When a company wants to raise money, it will sell shares of stock, or pieces of ownership to the public. Let’s say for example that XYZ Company wants to expand nationwide. In order to raise money to do that, it sells shares or ownership. If XYZ has 100 shares and you buy one of them, you own 1% of the company.
Individual investors can buy stock from online brokers or from full-service brokers. If you’re going with an online broker, you will pay less for the service, but you will need to do your own research and make your own decisions about your investment direction.
A full-service broker has local offices that you can visit, with advisors who can help you decide how to allocate your money.
Regardless of the type of broker you use, consider whether you want to buy individual stock (i.e. McDonald’s) or stocks in a mutual fund, which is a collection of stocks from diverse companies. Individual stocks may be easier to track for a beginning investor, but a diverse collection helps maintain a balance when one particular industry takes a hit.
Buying stock isn’t a get rich quick scheme. Instead, it’s more of a long-term strategy that requires research and patience (along with a little luck) to make your money grow.
YOUR 2 CENTS – What other questions do you have about investing or buying stock?
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