How to invest in stocks in 6 easy steps
Investing in the stock market can be intimidating, overwhelming, and an uncomfortable task to take on, especially if you weren’t taught it growing up, either at home or at school.
According to the annual Ariel-Schwab Black Investor Survey, 55% of black Americans participated in the stock market compared to 71% of white Americans in 2020. Although there are more blacks, exclusively young blacks, investing in stocks than ever, more work to be done.
One of the main reasons black people do not invest in the stock market is not only due to lack of familiarity, but also lack of confidence in financial institutions. And rightly so, based on their historical treatment of blacks, Freedmen’s Bank results in redlining.
If we can be trusted to spend our hard earned money on businesses that refuse to have our best interests at heart, then we can make it a priority to trust financial institutions that offer us the opportunity to invest in those businesses.
Now is the time for us to actively participate in closing the wealth gap and building intergenerational wealth – the ability to pass on assets for more than a generation. However, it is imperative that the investment is part of the narrative. We can start by investing in the companies that have the products and services that we support and use every day.
Once you receive a step-by-step guide on how to invest in your favorite businesses, you will feel confident not only in your consumerism, but in your ownership as well. Here are 6 steps to help you get started investing in stocks in less than 14 days:
Write down the businesses you support financially.
One of the best places to start is to write down the places where you are spending your hard earned money. It can take the form of where you shop for day-to-day survival, you reward and / or pay a recurring bill.
One of my personal investing philosophies is that if they [companies] make money with me, why can’t I make money with them? You can easily keep track of the companies you spend with by reviewing your debit and credit card statements. Here’s how you can divide businesses into different categories related to your daily expenses (money and time):
Financial institutions): Which financial institution (s) hold your mortgage, chequing, savings and loan accounts?
Food drink: Where do you buy your groceries, your morning coffee, your kitchen utensils, your wines and spirits?
Clothes: Where do you shop for your dress and casual outfits?
Technology: What companies help you stay in touch with your family and friends and meet others?
Check if these companies are public.
First, understand the difference between a brand and the business itself. And be aware that some businesses may be owned by a parent company. Companies owned by a parent company are called subsidiaries.
An example of a brand vs. corporation would be Air Jordans and Nike, Inc. An example of a subsidiary vs. parent company would be Converse vs. Nike, Inc, since Nike owns Converse. (Disclaimer: This is for illustrative purposes only and should not be used as investment advice.)
A public company issues shares to the public, while a private company is owned only by family, company founders and / or institutional investors. In the examples above, Nike is a public company.
A simple way to find out if a business is public or not is to search: “[Name of company] Stock. ”If a company is public, a stock chart will appear on the first page of the web browser.
Become familiar with the values of the company.
Before you invest in a business, you want to know what moves they are making (or lack thereof). You want to familiarize yourself with their leadership, values and overall business model.
Does the company value diversity, sustainability, innovation and all stakeholders (including employees and communities)? Do their actions or movements reflect your own values?
Understanding the moral of a business can help you determine if it’s something you want to invest in. When investing, you shouldn’t think of it as betting on a rise in the stock price, but rather believing in the company and what it is. for.
Create an action watch list.
A stock watchlist is a tool that helps you monitor the companies you want to invest in. Watchlists help you keep track of the current stock chart, price and company news.
It allows you to make informed decisions about when to buy stocks based on the criteria you have created for yourself.
You can easily create a watchlist of stocks on sites like Yahoo Finance or apps like the Stocks app if you are an iPhone user.
Open a brokerage account of your choice.
After you’ve created a stock watchlist, it’s time to open a taxable account known as a brokerage house, where you would buy and sell individual stocks and / or groups of stocks known as exchange traded funds.
Opening a brokerage account is a quick, easy and transparent process, which normally takes less than five minutes.
Companies such as Fidelity, Charles Schwab, Vanguard, Stash, Public are a few highly respected and highly recommended brokerages. An ultimate brokerage offers zero trading fees, fractional shares, an easy-to-use web interface and app, digestible financial education, and most importantly, asset protection.
Just like the money in your bank account is protected by the US agency, Federal Deposit Insurance Corporation (FDIC) – up to $ 250,000, your investments must be covered by the Securities Investor Protector Corporation (SPIC).
Create an investment plan.
Before investing, you should save for investing. The goal is to save first and then to invest because the art of investing is mastered by being strategic.
Here is an ideal cycle for investing in stocks, called the STICK method:
Record – Track – Invest – Copy – Keep Calm
To save: You can set aside $ 25, $ 40, $ 60 per week directly into a savings account or into the brokerage’s cash account. This action builds discipline so you can have enough to pull the trigger on your favorite businesses.
Track: Paying attention to the movement of the business and the course of its action helps you determine an entry point to buy the stock. Every three months, state-owned enterprises publish their financial position, such as their income, expenses, cash flow, and future projections.
Invest: Once you’ve become familiar with the price at which you want to buy the company’s stock, it’s time to act and pull the trigger. During this process, give yourself grace as your prize may not always be in your favor.
Copy: Building real wealth requires investing to be a lifelong habit, not a one-off activity. Intentional investors repeat their strategy of buying stocks when they are on sale, not when they are skyrocketing. Buying stocks should be like shopping in a mall or on Amazon Prime Day.
Keep calm: Unlike the stock market that many are used to, stock prices sometimes go down. This can be due to company specific news, bad income reports, geopolitical news, epidemics, among others. While it’s important to understand why stock prices are going down, it’s more important to stay true to your strategy and goals. Focusing on the short term when investing is one of the easiest ways to lose money, because that’s when fear, not freedom, is in order. of the day. While in-store sales don’t scare you off buying, then stock market sales shouldn’t scare you. One of the greatest stock market investors of all time, Warren Buffett, once said: “Be afraid when others are greedy and greedy when others are afraid”. Stay calm, stay the course, and build long-term wealth.