I wanted to talk to everyone about stock trading. It is a key stage on your journey to a successful and fulfilling life. With today’s technology, stock trading is no longer for the Wall Street elite, anyone can trade stocks in a matter of minutes. If you have access to the internet and/or have a cell phone you can trade stocks! Stock trading is considered a more high risk investment compared to an IRA but the returns (profit) are much higher.
Stock trading, simplified, is purchasing a part of the company. So if you buy one stock of Ford Motor Company, you are a part owner in the company along with all of the other stock holders. This allows you to listen in on earning calls, and other general business only allowed to be accessed by stock holders. Stocks like Ford or Apple are what would be considered “low risk” stocks. The reason they are considered low risk is because they are well established companies, with little likelihood of going anywhere.
There are tons of platforms to trade stocks but the platform I recommend is Robinhood. Robinhood is an extremely simple app to navigate, it allows you to make trades (buy & sell) with no fee, and it has a built in savings account inside that allows for a 2.65% yield yearly.
Signing up for Robinhood is easy and simple. Transferring money into your portfolio or into your bank is completed in a few clicks.
Robinhood offers expert recommendations on specific stocks. Experts vote whether to buy, sell, or hold. For someone who is new to stock trading this feature is extremely helpful. Often times when someone thinks about investing in stocks, they think about either making it big or losing it all. This feature helps out your mind at ease.
Robinhood also offers news in specific stocks, updates, real-time news, and everything you need to know before purchasing a stock. No one wants to buy a stock they know nothing about, this feature helps inform the potential buyer what is going on with the company they are looking to invest in.
There are many different kinds of stocks, penny stocks, blue chip stocks, etc. When choosing what stock to buy it comes down to how much money you are willing to lose. For example penny stocks generally have the highest potential to make you a lot of money. However they come with the highest risk. Penny stocks are often new companies with an idea, if they succeed and the idea takes off, you make a lot of money. If they fail and go bankrupt, you will lose money. It has happened to me several times. On the other hand, blue chip stocks like ford or Apple will fluctuate in price from time to time but the likely hood of losing money is relatively low.
Dividends are also a perk to your blue chip stocks. Dividends are payments made to a stock holder for holding stock in a particular company. Some companies pay dividends monthly, but most pay quarterly (every three months). For example I own one share of ford, they will pay me a certain percentage for owning the stock quarterly. Usually I see between .38 cents a share and up to $1.68 per share. This adds up when you have a bunch of shares!
I am 25 years old, I follow a more high risk strategy to try to make more money. As time goes on I will get rid of some of my higher risk stocks and trade them on lower risk stocks. Right now my stock portfolio is 60% high risk, 40% low risk. I also have some mutual funds as well which are generally considered low risk. For someone who is in maybe their 50s or 60s I would recommend more of a 70% low risk and 30% high risk portfolio. Obviously, it is totally up to you how you divide up your stock portfolio but the key take away here is to DIVERSIFY!!
Diversifying your stock portfolio is the smartest thing you can do to balance out your returns (profits). Buy automotive stock, energy stock, technology stocks, etc. that way if one market is doing bad, maybe you can make up for it in another market. I have seen several investors put all of their money in one industry. They either do good or lose it all and I promise you the stock market fluctuates every second. Things will effect the stock market that you would never think would. Air on the side of caution and keep your stock portfolio diversified.
Hopefully by now you have some idea on how to get into stock trading as a form of investments. Remember to diversify and always remember, the stock market moves up and down all the time. my best advice, do not panic and sell. You could buy ford at $8.38 a share, watch it go down to $4.32 a share and panic sell to try and avoid losing money. Then, three months later it is back up to $12.47 a share. Do not panic sell, stay with a stock for the long haul and it will pay generously. Best of luck, and remember that you are investing in your future!