Beginner's Guide: How to invest in the stock market

It’s never too soon—or too late—to learn how to invest in the stock market. In fact, even long-time, successful investors will remark…“I wish I had started sooner.” So true. I definitely wish I had learned how to invest in stocks sooner. You see, we often limit our ability to build wealth because we sweat the risk we think comes automatically with investing in the market. In reality, it’s the how to invest, or the getting started part, we may fear. Do you fall into this camp?

Or maybe, like I did, you delayed learning how to invest in the stock market, because you…

wonder if today is the wrong time to invest,
think you don’t know enough,
think you don’t have enough money to invest, or
are afraid you’ll make a huge mistake?

Now don’t misunderstand, I’m aware the stock market can be a risky place, especially if you don’t know exactly how to invest. However, I’m not afraid of the market, even though every day in the market is not a money-making day. I’ve learned how to invest appropriately so I can sleep at night. I don’t expect stocks to rocket to new highs in a straight line, and I’ve have seen that some stocks are downright losers.

Yet, the stock market has marched significantly higher over its decades of historic ups and downs, and it’s been a good way to grow a financial nest egg. Granted, beginners don’t know as much about how to invest as investors who have been in the market awhile. But you can fix that gap.

How to invest in what’s right for you*

You reduce risk and increase rewards in the market by learning how to invest in industries you understand, products you know. You can start by researching to discover how a company makes money, who buys the company’s products, and how competitors fare too.

If you cannot explain an investment to your grandma—even if it’s highly popular and everyone you know is buying it—then you should step back or find another investment. Whenever I’m working with a class of beginning investors, a few are usually excited about some popular investment they’re eager to buy.

For example, it’s been marijuana, or cannabis, stocks lately and before that, crypto-currencies. These students don’t have an account yet or know how to invest. But they’ve heard others rave about soaring cannabis stocks (aka your pot ‘o gold is waiting if you get in on the ground floor now), or a friend bragged about making a profit in a matter of days. These students want on the cannabis bandwagon to riches.

Wait! What’s wrong with this picture?

Before class began, these are the same students that considered it risk to learn how to invest in the stock market. Now here they are, motivated to put money into an unproven, brand new industry. They haven’t studied cannabis stocks, nor have they assessed the downside or understand how industry profits are made. They aren’t setting themselves up for success, but for disappointment.

How will they know when to sell? How do they know what to pay for the stock? While a beginner may luck into an unknown stock or industry that soars right after they invest, the odds are against it. Your chances of success are much better if you take time to know an industry and study the companies in that space.

How to invest in industries you know, products you trust

You don’t have to uncover a brand new, untried industry or company in order to find a good investment. Finding a company to invest in doesn’t have to be difficult – or boring. And you don’t need to be a financial wizard. Good stocks are everywhere.

For example, I’ll tell you a story about a janitor my son met.

My son had a college internship at a Fortune 500 firm in Chicago, and as a result, attended several company functions. One of the first he told me about was a retirement party. It was for a janitor he had met. The janitor had to give a short reply as he received a gold watch and said, “I want to thank the company for making me a millionaire.” Say, what?

The janitor told his story: One day early in his career, he was cleaning a restroom when two employees walked in. One was telling the other why he enrolled in the Payroll Stock Option Plan (PAYSOP) and how well his investment was doing. The more they talked, the more interested the janitor became. He asked them how he could do the same. “Just go to HR (human resources) and someone will show you,” they said.

That’s exactly what the janitor did. He signed up to put $20/month in the company PAYSOP. It wasn’t much. But over his working years, it grew to into a nice nest egg. Now here’s a guy that didn’t have a fancy education, was working a hard job with a lower paycheck, and had a family counting on his income. He certainly didn’t have extra money to risk, and I’m guessing he didn’t know much about the stock market when he began.

But he did know the company very well.

What my son said next was…priceless

Now here’s the rest of the story, the most important part for me. My 22 year old was stunned, but excitedly said, “Mom, if he can do it, so can I!”

“Yes, so can you,” I replied. I was thrilled because, while I had often tried to get my son to invest his summer earnings in the market, it was really a random stranger who convinced him.

You may be in the same position as my son—thinking you don’t have enough money to spare. Remember this janitor’s story.

Yes, you can learn how to invest too

To ease into investing in stock, look to a company you understand with products you like. Consider your favorite foods, hobbies, and brands of clothing. Do you shop at certain websites or wear one brand of running shoes? Like specific tech or sports gear, the latest movies or new cereals? Some great companies produce your favorite products, from clothing and electronics to peanut butter, pizza and hamburgers.

And, they reward their stockholders. The point is, if you are familiar with the products, it’s easier to understand how the company makes money. You’ll also follow news and be tuned into changes when you use the products.

Guideline #1: Find products and industries you know.

If you buy and enjoy certain products or services, chances are that many other consumers do too. Judge a company’s popularity and profits by the crowded stores, customers’ comments online, and product sales. Does the product appeal to more than one age group? Does the company get more customers by offering many products? Is a product priced so anyone can buy it? Do new products debut often?

Guideline #2: Find companies that attract many customers and turn them into loyal fans.

Companies with consumable products – items bought again and again – can lead to a good investment. Consider how much you spend for food, shampoo, toilet paper, diapers, cell phones and other items used every day.

Guideline #3: Find industries with products that customers buy and consume often.

What makes stock a good investment?

Stockholders must be patient to reap the best rewards from owning stock. Stockholders can actually make money two ways:

selling your stock for more than you paid and
earning a dividend, a reward like interest on a savings account.

Not every company will pay a dividend, however, that doesn’t make the company undesirable. Many companies with high growth do not pay stockholder dividends because they use profits to fuel more growth. Today’s successful high-growth companies can become tomorrow’s blue chip stocks.

How do you find today’s stocks that will grow and be great tomorrow?

Identify industries that sell products that many people really want.
Find companies with imaginative, ethical and competent management with a vision.
Look for companies that reinvest their earnings into research and product development.

Investors can choose from many, many publicly traded companies on the two most active U.S. stock exchanges, or markets. A few thousand stocks are listed on the NYSE, and more trade on the NASDAQ exchange. Some companies are very large and internationally known, while others are newer and growing rapidly.

You probably recognize some popular companies and know their products well—Apple, Microsoft, Johnson & Johnson, Visa, IBM, Home Depot, McDonalds, Disney, Walmart, Nike. These are among the most widely held stocks, and are part of the Dow Jones Industrial Average (DJIA), a market index of the 30 top stocks.

Recognized as today’s blue chip stocks, these growing companies weren’t always the big dogs or most coveted. For example, steel was a growth industry in the 1940s. From 1950-70, growth stocks included Xerox, Eastman Kodak and Dow Chemical. From the 1980s to 2000s, computer and technology companies became growth stocks.

Today’s Dow 30 stocks also happen to distribute annual dividends to stockholders, which makes them even more desirable.

Small dividends can be a big deal

Remember playing Monopoly and when you drew the “Collect Dividends” card, you cheered? That’s the feeling dividend investors have. Dividends sweeten your investment, like favorite pie when you top it with ice cream.

A dividend is paid if a company wants to share profits with stockholders, an extra reward. If a company prefers to grow more rapidly, profits are retained, or returned to the company. Either dividend stocks or high growth stocks can be attractive for stockholders.

How to invest in reliable research

Yes, dividends sweeten a slice of stock market pie. But ever had a piece of pie that looks delicious and tastes disappointing? Likewise, shares of a stock can also appear tantalizing but be less than rewarding for you. To avoid being surprised, learn how a company stacks up with a little detective work. That might include sampling the company’s products, reading annual reports, conversing with customers and competitors.

Search a variety of sources, keeping in mind the publication authors and website publishers. Do reputable financial experts write the articles? You should realize that, like companies, publications want to sell you products. Smart stock detectives find unbiased resources, often at the library. Here are some examples:

The Wall Street Journal, Barron’s and other periodicals report news that interests investors.
Magazines that analyze industries and compare companies include Kiplinger’s, Better Investing, and AAII Journal.
ValueLine, Standard & Poors, and other investment research services like Morningstar.com provide standardized reports on publicly traded companies. Each report is packed with an industry ranking, price forecasts, company, history, price trends, product description and an opinion of the company.
Websites can be good tools to gather data about stocks, but you might sort through dozens that aren’t. Use sites that are regularly updated and don’t lure you to specific investments. For starters, try the SEC, Motley Fool, Yahoo Finance or investor education pages on broker sites.

Guideline #1: Know where your research originates.

Guideline #2: Hot tips and rumors are no match for your own detective work.

Guideline #3: Keep an open mind and compare opinions before making a decision.

Looking for a good way to explain the stock market to kids? Check out our book!

How to open your investment account

Before you can buy investments, or assets, you must have an investment account. This is not a regular bank account, but one at a brokerage firm where you can hold both the assets you buy and cash to trade. While you must be 21 years old to buy and sell investments, you can have an account as a minor. Your account is then a Uniform Gift to Minors Account (UGMA), which means an adult (custodian) is listed.

Most brokerage firms will allow you to open an account online. Some also open accounts at a bricks-and-mortar location or accept mailed applications. Before granting your account, the firm must ask questions about your risk tolerance, investing experience and knowledge, income, net worth, tax status, and types of investments you will consider.

Don’t be offended. The firm is adhering to industry rules. It’s part of the broker’s job to make sure you understand investments you plan to choose.

Before you open any account, make sure you know the firm’s policies. Be comfortable navigating the firm’s website because you will likely make trades online. Also know how to contact customer support or talk with someone if you need help. You must also decide if your trading account will be a taxable one or not. Accounts opened as Individual Retirement Accounts (IRA) or Roth IRAs have special tax privileges.

You can have one or several brokerage accounts. Each account can hold a variety of asset classes. Assets classes include stocks, bonds, cash, commodities…you get the idea. All your accounts together are considered your investment portfolio.

What asset allocation means

Strive to make a portfolio a mix of investments, or asset classes. If you compare your portfolio to a plate of food at Thanksgiving dinner, each food type represents an asset class. Your plate shows how you’ve allocated your assets—everyone’s dinner will look a bit different.

For example, if you’re on a diet, you might allocate more to veggies, rather than pie or turkey. Maybe you choose to allocate 60% to veggies, 30% to dessert, and 10% to turkey. In the investment arena, investors might allocate similarly to stocks, bonds and cash—like 60% stocks, 30% bonds, 10% cash.

Investors strive to get a good combination of investments from different asset classes to:

achieve optimum returns (rewards) for their timeline and
lower risk of exposure, or all assets going down at once.

As some asset classes do well when others do not, your profits and losses may eventually cause some assets to grow out of proportion.

When your portfolio does not reflect the risk-reward balance you want, you can adjust it in two ways. You can rebalance by adding new money. Or if you don’t add money, rebalance by selling something in a high-performing asset class and use those proceeds to buy an investment in a different, lower performing class.

How diversification lessens risk

Now, back to that yummy Thanksgiving dinner and your plate filled with 60% veggies, 30% dessert and 10% turkey. Alas, your dinner could be comprised solely of Aunt Mary’s carrots, Grandma’s pumpkin pie, and a turkey leg. Not very diverse, yet it fits the proportions you wanted for your diet.

Or, you could meet those same proportions another way: smaller helpings of carrots, broccoli, green beans and corn to get 60% veggies; smaller slice of pumpkin pie with ice cream and a cookie for 30% dessert; both dark and white meat for 10% turkey. That’s many more flavors, very diversified. (And just in case Aunt Mary’s carrots were dry and Grandma’s pie wasn’t great? You still have other tasty veggies to eat and dessert to enjoy, so you won’t go hungry.)

That’s how diversification works in your portfolio too. This is why you wouldn’t own just one stock, now matter how appetizing it sounds. Diversification doesn’t remove all your risk, however, it does lessen risk by spreading it out even further within your asset classes. Keep in mind you might not be able to do all of this in one or two trades. It is a process to reach your portfolio goal.

Even the surest of investments has ups, downs

So a solid portfolio has an investment mix—money market/savings account, stocks, bonds, real estate. (But it can be weighted toward stocks if you wish.) If you do need cash, tapping a savings account is easier and quicker than selling stock. Whether it’s doing well or not, you might not want to sell your stock to get cash.

Guideline #1: Don’t keep 100% of your portfolio in the stock market.

You may be tempted to bet on one industry—or even one stock—when your research shows it will skyrocket. Don’t. Many investors who owned only high-tech stocks suffered when that sector crashed several years ago. Some industries are naturally complementary; one moving up as another trends down. (Energy shortages can drive up oil stocks but cause auto and airline stocks to underperform, for example.)

Guideline #2: Don’t limit stock picks to one industry.

No stock picker scores 100%, not even professionals. Betting for a home run with one stock is a dangerous gamble, no matter how much you like the flavor (perhaps your employer’s stock). If you own 10 stocks, chances are two or three are winners, two or three are losers and the rest are average performers. Mix growth and value, large and small, cyclical and non-cyclical.

Guideline #3: Don’t bet everything on one stock.

How to place a trade

Once your account is open, you can set up a login ID and password to trade online. And, you need money in your account. How much you must have depends on brokerage policy.

Most investors keep their investing account liquid enough so purchases can be automatically deducted. You do have the day you buy plus two more days — referred to as T+2 — to have cash in your account for a purchase. If your account lacks enough money, the broker can sell the stock and charge your account.

3 ways you can buy stock through the market

Many types of investors buy individual stocks, but there are alternatives. You can:

Buy individual stock yourself,
Buy a mutual fund,
Buy an Exchange Traded Fund (ETF).

Mutual Funds and ETFs are pools of money from many investors. They can be good investments for the inexperienced. Once you get comfortable with investing, you may want to diversify into individual stocks where you have more control on what is bought and sold.

A mutual fund can be a basket of stocks. Most 401k or 403b plans offer mutual funds. Index funds are one variety of mutual funds. Another variety is actively managed funds. Index funds will have about 1/10^th the fees of actively manage funds as they don’t trade very often. (They may trade 1-2 times/year as a stock moves into or out of the index.)

Mutual funds have expenses its investors pay, which can include commissions, redemption fees and operational expenses. On average, mutual fund expenses range from as little as 0.1% to as much as 3% or more per year. While these expenses are not seen on the monthly statements, they can impact an investor’s overall return.

An ETF can also be defined as an investment basket, but it operates a little differently than a mutual fund. An ETF is bought and sold during the trading day. The price is determined by investor demand at any given time during the day. Mutual funds are bought/sold for the price at the end of the trading day.

Your fund purchase is invested according to the fund’s prospectus. The prospectus defines a fund’s investment strategy and explains the costs and risks. It is extremely important to you because it contains information you can’t get elsewhere.

Stocks are the building blocks for funds

We’ve focused on investing in stock because companies with stockholders are the backbone of our economy. As such, stocks are the basic building blocks in a growth portfolio. If you know how stocks work, it’s easier to evaluate other investments you might want, like mutual funds, exchange traded funds, target-date funds, index funds, bonds. (If you buy individual stocks, you do cut out the fees that funds charge and have control over what’s bought/sold when.)

You might be thinking, “Oh, I already have a mutual fund.” That’s great. Do you know all the stocks in your fund? How do you begin to evaluate a fund if you don’t understand the basic building blocks – stocks — in the fund?

You might also like the two primary sites I use to research stocks or understand investing concepts:

The investor education site from the U.S. Securities and Exchange Commission (SEC), the regulator of publicly traded companies and
another offered about NYSE, the stock exchange.

You can invest directly with some companies

You may decide you want to buy individual stocks but you’re not sure about amounts. Rather than buy a stock through your own brokerage account, you have other ways to become a stockholder:

purchase directly from a company that offers a DRIP account (Dividend Reinvestment Program)
work for a company that offers a PAYSOP (Payroll Stock Option program)

You can determine the time period and how much to buy, but not the exact day your money gets invested. Both a DRIP and PAYSOP typically mean you contribute a set amount of money regularly, rather than make a one-time purchase of the number of shares you want. This is an automatic way to invest the same amount of money every month, or every paycheck. When prices are lower, the amount you set aside buys more. This is referred to as dollar-cost averaging.

Also, if you purchase stock using a DRIP or PAYSOP, it probably means you will buy fractional shares.

What is a fractional share?

A fractional share is less than a whole share. Let’s say you’ve done your research and want to buy Amazon or Google stock. But the stock prices are steep, and you have budgeted less than $1,000 to start investing. If your brokerage account won’t allow a purchase less than one full share of a stock, check for alternatives. (One full service broker that does allow purchases of fractional shares is Fidelity. Others may eventually follow suit.)

This is where FinTech comes into play. Many of the new micro-investing apps are specifically set up for the small or micro investor, so you can easily buy fractional shares of stock. These apps include Robinhood, Stash, Motif, M1 Finance, Public, Stockpile, SoFi Investing. Some also offer fractional shares in ETFs or mutual funds. If you open an account, you do buy online. Your trades do remain in your app account and don’t go to another brokerage account you may have already.

Do pay attention to the fees. While some micro-investing apps have $0 for trades, you might incur fees for other services, money transfers, statements, or personal help with trades.

Deciding the price you want to pay

No one wants to overpay for a slice of stock market pie, but some are tempted to chase price. How do you know the best price to pay for a stock you really want to buy?

The old adage, “buy low and sell high” is reasonable. But “buy lowest and sell highest” is not. Chances are you miss the best opportunities to make money if you seek the absolute highest or lowest day, or time the market.

Consider this example: You bought shares of Apple stock in mid-December, 2018 when it traded between $150-160/share. When Apple reached $260/share eleven months later, your brother bought some. He “bought high” compared to you. You “bought low” so would have reaped a nice profit if you sold then.

However, what happened if you waited another month or so – the end of December? Apple stock declined and you could have received only $150-$160/share if you needed to sell your shares. That was definitely not “selling high” was it? (Fyi…Apple rebounded, reaching new highs a few months later.) Does your brother’s $260/share now look low for Apple stock? Realize your low is relative to your high, not someone else’s.

Guideline #1: Timing the market to buy lowest and sell highest isn’t realistic.

Guideline #2: Before you fall in love with a stock, know your buy and sell ranges.

Guideline #3: A stock may seem highly priced but still have plenty of growth.

Use two calculations to help decide if a stock is trading at a price you want to pay:

Compare dividend yields. The more you pay for the stock, the lower your yield. (If the stock has no dividend, the yield is zero.) Calculate dividend yield like this:

Annual dividend divided by current price = yield

Compare the Price-to-Earnings ratios – PE.

Use PE ratio to help compare how to invest

You might be interested in two competing companies, like Pepsi Co. and Coca Cola. How can you compare one stock to another when there are so many variables? Is the lower priced stock the better buy? When is a stock trading at a fair price? The price-to-earnings ratio —or PE—is the key.

If a stock’s PE is historically higher than average, investors are paying a premium price to own shares. These investors think the stock will have higher earnings in the future. This is why the PE for companies such as Walmart, Amazon or Apple can be higher than their competitors. If a stock’s PE is lower than competing stocks, it may be under valued. When a company’s growth rate matches its PE, chances are it’s fairly priced.

Check if the PE is trending up or down. Is the PE unusually higher or lower? The PE can vary from industry to industry, and even within the same industry. Some industries typically produce higher PE ratios than others. For example, many computer stocks had PEs of 45 or higher when some bank stocks were under 14.

A website that details stock prices will usually list the historical, or trailing PE. Compare price and earnings using this simple formula:

PE = price of a share divided by annual earnings/share

Guideline #1: PE shows if a stock is cheaper or more expensive than competitors.

Guideline #2: If your stock’s PE is out of its normal range, try to find out why.

You can focus on a few numbers

In addition to dividend yield and PE, I also look for the following in ValueLine or Standard & Poors :

Earnings growth. Is there a consistent pattern of growing earnings? Is the trend line steadily up?
Volatility or Beta. The market has a beta of 1. So if a stock’s beta is also 1.0, it moves like the market. The higher a stock’s beta, the bigger the risk. A low beta—less than 1—means a stock doesn’t move as much. This might be boring to you, but remember your risk personality.
Book Value. This is what is left if all the company’s assets were sold and all liabilities paid.
Debt. Some companies have a lot of debt, but there are companies with no debt.

What is the Rule of 72?

Stockholders make money when they sell stock that has increased in value. Investors often use the “rule of 72” to calculate when investments will double. This is the formula (does not include dividends) to do that:

72 divided by annual rate of return = # years to double investment

For example, if your stock earns 9%, your investment will double in 8 years. Get your stock’s rate of return from the annual report, a broker, the library or company website. Growth-oriented investors like to buy stocks that might grow 15-20%. They look for stocks that could double in five or six years. Using the rule of 72, you must earn 14.4% a year to double in 5 years:

72 divided by 14.4% = 5 years

Such growth is possible in some industries. A few years ago, the price of many computer stocks grew by more than 30% a year. Over the last 100 years, stocks have returned an average of 6-10% a year. But this is an average. Realize not every stock increases in value every year.

Guideline #1: Buy stocks with growth potential.

Guideline #2: Don’t expect a stock price to go up every day, but look for it to trend up over the long term.

Will you bat 1,000 when learning how to invest?

Investing is a long-term thing. And your timeline matters – the longer you stay in the market, the less your chances of losing. Someone staying invested for 20 years incurs less risk than someone in for 4 or 5 years, given the same investments.

With practice, you can make better decisions, get more hits, make fewer mistakes. No one bats 1,000… but you don’t need to. Look at it this way: A good batting average for a pro baseball player is about .330, which means they get a hit, get on base and no one gets out about one third of the time. Otherwise, the player makes an out.

Home runs aren’t the norm either. In fact, single hits – from the steady player who gets on base frequently – is preferred. Did you know that Babe Ruth – a home run record holder – struck out or was put out more than he hit home runs?

The same goes for investors. We won’t hit a home run with every stock. What we’re looking to do is be that consistent player who gets on base more often – small hits add up to big scores.

How to develop your investing habit…and a plan

When and how you invest is totally your decision. Do the current stock market ups/downs cause you stress, present a buying opportunity, or not change your investing thoughts? It depends greatly on your risk personality and how much money you can afford to risk. Still, the most difficult action is getting started on investing. Here’s how to ease in to buy a stock:

First, make an investment plan. Even if you only want to invest $500 or $1,000, do a plan.
Decide what to buy. Choose your time period to buy, and decide how much to invest each time. For example, maybe you saved up $1,000 and decide to invest it over four weeks, or $250 a time. This is a good way to wade into a choppy market.
Be disciplined and follow your plan. By sticking to a plan, you can take emotional decisions out of your purchases.
Financial advisors have a role. Before you commit to an advisor, decide what type of financial advice you seek.

Those who invest on their own are considered self-directed investors. Other investors are paying a financial advisor money to manage their portfolios. This is referred to as “assets under management.” The fee a financial advisor takes to do this is on top of the fees for buying and selling investments and fees within mutual funds. Do know an advisor has a role, however. Just realize they are paid somehow, have varied expertise, and change = cost. Plus, paying someone to handle your finances is no guarantee of no mistakes!

Guideline #1: Develop your investment plan and stay focused.

Guideline #2: How risky you are in other areas of your life gives clues to how you feel in taking risks with your money.

How to keep your costs low

Investment costs might not seem like a big deal, but they add up and compound too. You see, compounding works in many places. In other words, you don’t just lose the small amount of fees you pay annually —you also lose all the growth that money might have had earned for future years.

The 1% fee starts at $1,000 the first year of your $100,000 investment. It adds up to about $28,000 as your balance grows over the 20 years. If you didn’t pay the fee, you could have invested that $28,000, thereby putting ALL of your money to work earning more. That small fee doesn’t sound like small potatoes any more, does it?

Yes, fees matter.

Protecting your portfolio matters too, because investor fraud is very real. Victims are not just the rich. Fraud and scams happen often because it’s lucrative, to the tune of $50 billion in losses a year. The older you get, the more you’re targeted. Even well-meaning relatives or friends unknowingly perpetuate scams by inviting you to invest.

You must protect your nest egg too

I don’t mean to scare you about fraudsters stealing your money (or identity). But fraud happens so fast, and it’s getting sooooo common. It’s not easy to recognize either – 4 in 10 investors can’t spot a scam. If sounds too good to be true, it probably is. These real stories drive home that point:

#1: In the 1980s, groups hosted meetings to find investors for partnerships in launching Iowa’s gasohol plants, a new industry. Many targeted farmers who produced the grain a plant would use. Buy-in was commonly $25,000-$50,000 or more, so not cheap. These were high-risk, illiquid investments, but not a true scam. Few plants made big profits. You could have been the exception.

Remember, greater risk brings bigger rewards. Buyer beware!

#2: A few years ago, an Iowa teacher lost her entire pension. Though she said she knew better, she got confused and returned a card for a “free-lunch” seminar instead of one for another event. As a result, the host advisor convinced her to withdraw her pension and let him manage it. Free-lunch seminars and portfolio reviews are common, popular offers, especially as you’re nearer to using your retirement nest egg. They create opportunity for financial advisors for sure, but not likely for you.

Remember, there is no free lunch.

Yes, buyer beware!

These Iowans could have contacted a state agency, the Iowa Insurance Division (515-281-5705) to verify the investments. If you’re targeted for similar “opportunities,” you can find your state agency via NASAA, the North American Securities Administrators Association.

#3: My friend at the SEC convinced me to attend a “money show” to see the investments touted. I hear about the latest – cannabis IPOs, oil/gas exploration, farmland, crypto-currency. All the trendy stuff is promoted, and I’ve heard many pitches. (I’ve never invested there but many do.) Meanwhile, my friend checks exhibitors for compliance and chuckles as they scramble.

Is it opportunity knocking or scams? It’s Buyer Beware.

How investors make wishes come true

But as the saying goes…. with risk comes reward. So the bottom line is: In order to gain wealth, you have to take a bit of risk. How much? It depends on what you feel you can handle – which your risk personality will tell you.

Hey, you can do this investing stuff if you want. Here are five takeaways:

Get started. Like the story of the tortoise and the hare, slow and steady wins this race. You don’t have to jump in quickly or all at once.
Find money to invest. – This should remind you about the janitor and shoe factory worker. They made it a habit to invest small amounts that added up over time. The key is to save as much as you can, and then invest, building your portfolio.
Understand risk – Investors learn to understand risk and their risk personality. And then, they manage it and invest accordingly. What sounds risky to one investor might not be so for another. You want investments that make you comfortable and you can sleep at night.

Realize knowledge beats hot tips. Is it worth your time to learn a new skill like investing? As you gain knowledge, you may intimidate some financial advisors who want to sell you something. You might just know more than they do.
Practice to get better. How much more comfortable would your life be with an extra quarter or half million dollars when you reach retirement?

Please remember that no one cares more about your money than you. Not your parents, not your friends, not your kids. Sure, they care, but not as much as you should. Good luck!

*This content is presented as strictly educational in nature, with the understanding that the publisher and author are not providing legal, investment or other professional services and are not liable for any loss, damage or injury. Investors should seek the assistance of competent professionals.

Like this story? Be sure to read part #1 and part #2!

Beginner's Guide: How to invest in the stock market - Root and Bloom Forever (2024)