Stock Market For Dummies

Recent studies have found that millennials are less likely to invest in stocks. Why is that? Millenials have access to more information about stock markets than any other generation. Research indicates that it may be because they’re uncomfortable taking risks. Not every stock market investment comes with that much risk, though; you just have to know what to look for! When you’re in a pinch, use our Stock Market For Dummies guide.

Stocks Are Tiny Pieces of Companies

When you’re new to investing, it’s easy to think that stocks are just paper or numbers, but stocks are actually shares of companies. When you’re looking at investing, look beyond the numbers. If you can, look at the company’s mission statements, executives, and more to get a personal feel for the company.

Picking Stocks:

You can figure it out by yourself, but it’s easier to get started with the help from a financial advisor. If you’re shopping on your own, there are a few things you should know. Instead of buying stocks solely on their prices, look at the company’s overall value.

Stock prices alone are not a good measure of company value. For example, if the stocks are worth $50 but there are 100 million shares, then the company is worth $5 billion. If the stocks are worth $25 and there are 300 million shares, then the company is worth $7.5 billion.

Buying Stocks:

If you’re working without a financial advisor, you should set up your broker account. Pick a broker firm first. Try to shop around and find one that you feel like you can work with. Can you walk in anytime to get help? How does the broker let you deposit money into your account? A brick and mortar firm is going to give you more help, but an online brokering firm will be cheaper. There are pros and cons to each option. Once you find a firm you like, you should be able to buy and sell stocks as you please.

Terms You Should Know:

  • IPO: stands for initial public offering, this is the first stock sale from a privately traded company going public
  • Dow Jones: most tracked index of stock trading of companies in the US
  • Nasdaq: a different measure of stock trading, also a stock exchange
  • Preferred stocks: people who hold preferred stocks get paid dividends first
  • Common stocks: common stockholders are paid dividends last, but they do get special voting privileges
  • Dividend: part of the company’s profits paid to shareholders
  • Trading: buying and selling stocks
  • Investing: essentially the same thing as trading, but with a more long-term connotation