Let’s talk about stocks, baby. (Salt-N-Pepa voice) Stocks seem really scary if you watch various business media and attempt to understand the entire market. In my experience, there isn’t much coverage on how to invest for everyday people. Let’s try and remedy that!
Stock investing has multiple avenues and they range from wildly complex to completely guessing. The entry to stock investing is incredibly low. Opening a Fidelity/eTrade/pick your online investor account is incredibly simple. Google it, and you’ll find various options to start a brokerage account. (Personally, Fidelity has been very easy to use) Once you have your brokerage account you’re ready to start investing in stocks.
Picking stocks can definitely be a daunting task. It is an important step to analyze companies you want to invest in, but my preference is to apply the K.I.S.S. rule. (K.I.S.S. = Keep It Simple Stupid) Invest in stocks you care about. Invest in stocks you have a rooted interest in. Remember, stocks are small pieces of company ownership openly traded between investors. Daily trades between investors determine the current selling price of a company. Thinking about how to decide what stocks you want to own yet?
Deciding What companies own the products/services you buy or use everyday? What companies own the products/services your family and friends rave about? Take a look at those companies first. It’s relatively easy to find 5-10 worthwhile companies that create items important to you. Think about who provides your phone service, your bank, or maybe your favorite place to eat. Next, investigate these companies to determine financial health and overall attractiveness.
Luckily, financial statements of public companies are comparable. My favorite indicators of financial health are the Price/Earnings ratio (P/E) and Earnings Per Share (EPS). P/E will indicate current market price vs what an entity earned during the last year or quarter. It provides information around the value of each stock. EPS will provide information around what the entity earned based on how many shares have been issued. Both measures can then be compared to competitors in the same industry. In my opinion, that’s where I find these to be the most useful.
When you are first choosing stocks to invest in, remember to dumb it down for yourself. There isn’t a need to be an expert initially. Always use money that can be left in the market, because stocks will ebb and flow in the short term. Investments in good companies will appreciate in value over the long term and if you are completely uncomfortable picking a company, invest in the entire market. S&P ETFs can be bought to be invested in the entire market. Start small and have fun owning companies you care about!
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.