Let’s talk about the stock market. The thought of investing can seem scary to some. Until recently, most regular people like you and me didn’t have personal access to the market. There was usually a middleman who took your money, invested it for you and then – of course – took a commission right off the top. Today, there are lots of platforms that give you unrestrained access to the possibility of wealth building. But before you dive in and possibly lose your shirt, let me break it down for you.
Fundamentals of the stock market
The stock market is where investors and traders sell shares of a company. A share, or stock, represents ownership in a company. So if you have stock in a company, you own a slice of that company, kind of like a slice of pizza. If you have a company with 100 shares available and buy 10 shares, you now own 10% of the company. Huge companies like Amazon have way more shares than that available, but owning just a sliver of any tech giant can help you build your wealth.
How do I know where to put my money?
If you want to buy stock in a company, make sure that you do your research. Look at these factors:
- How much money the company makes each quarter
- What industry they’re in and how large they are in that industry
- How effective their leadership team is
Don’t make a quick purchase decision. Always make sure the company you buy into is set to grow so that you can grow your wallet, too.
The company went public. So what?
When a company joins the stock exchange or goes public, it’s called an IPO or an initial public offering. They do this to raise money, and they also look to their stock price to get a sense of what investors believe about the future of their business. If the price starts to drop, that’s a bad sign. But if it soars, that means people are excited about the future of the company. For the most part, the markets react to human emotion. That’s why the stock market can crash if there’s bad news, just like it did in 2020 and – before that – in 2008.
Why you may be afraid to invest
Millennials like me already have experienced a couple of market crashes and know how it could impact our lives. This may be the reason that many young people are afraid to invest. Investing in the stock market can be risky, but if you’re educated and disciplined, it can be one of the best ways to build wealth. Keep in mind: Most rich people have a lot of their money parked in the stock market.