The best class I took in college was “Personal Financial Planning.” I’m serious. In fact, I think every college student should be required to take this. We learned about investments, stocks, and 401K. Things you’ll need to know if you want to accumulate wealth.
Once I graduated college, I figured it was time to look into how to invest.
It was 2008 and the market had fallen significantly. I didn’t have much money but had a feeling it was a good time to buy. I was young and the market was low. My husband, Chris (who was my boyfriend at the time) was a Personal Financial Planning student and was eager to get invested in the market. He referred to this dip in the market as a “great buying opportunity.”
I took a risk and bought 10 shares of Apple. It took me about 30 minutes and a cold sweat to hit the “submit” button but I am glad I did.
A lot of people are afraid to buy stocks because of lack of understanding. I asked Chris some basic stock questions. He tried to keep the answers as simple as possible.
Q. What is a stock really?
A. A stock is partial ownership of a company. When you buy a stock, you are buying a share of the company. Owning shares entitles you to receive part of the company’s profits.
Q. What affects the price of a stock?
A. Supply and demand. The price goes up if more people want to buy than sell. The price goes down if more people want to sell than buy. One example of this is a news release about the company. If the news is positive and more people want to buy then the price goes up, if the news is negative and more people want to sell then the price goes down. Stock prices fluctuate on a daily basis. There are many other things that can affect the price of a stock also.
Q. What are the fees to buy and sell stocks?
A. Typical trade fees are about $4.95 per trade regardless of the size or dollar amount. You pay the fee when you buy and sell.
Q. What does it mean when the stock market is up or down?
A. When the S&P 500 is up for the day people refer to it as the market is up and when it is down people refer to it as the market is down. The S&P 500 index is the best representation for the overall U.S. economy because it represents the largest 500 publicly traded corporations in the U.S.
Q. What is the minimum amount needed to buy a stock?
A. As long as you have enough to buy 1 full share of the stock, there is no minimum. However, keep in mind the trade fees. If you buy 1 share of a $5 stock, you will pay about $9.95 with the trade fee. That means the stock would have to double in price before you would make a profit. Some places may offer a limited number of free trades when you open an account (take advantage of those if possible).
Q. Where do I go to buy a stock?
A. You will need a brokerage account. Here are few examples: Fidelity, Vanguard,E*Trade, TD Ameritrade, Schwab.
Q. What is a good source of information if I want to read more about stocks?
A. Here are some free websites you can go to for information on stocks: Yahoo Finance, Finviz, MarketWatch, and StockCharts.
Disclaimer: The information on this blog is for educational and informational purposes only. We recommend you consult with a financial professional before making any financial decisions.
Aditi
9 Mar 2021Great intro into stocks! This will help me explain the basics to my kid. Thanks!!
Tie
11 Mar 2021I absolutely loved that you broke this down! It always has seemed out of reach, but now it doesn’t. Keep writing excellent content!!!!
Cherrye Vasquez
18 Mar 2021Thank you. I wish I’d invested in stocks earlier on, and taught my daughter the same. You’re very wise. Great, informative post.
Karri
11 May 2021This overview was very helpful! Thank you! Gives me a bit more confidence!
Brenda Weathers Hargroves
11 May 2021This is a good introductory explanation of how buying stock works.
Sabrina
11 May 2021Great information to learn the basics about what exactly is stock. It would be so helpful if they taught this in school. Thanks for sharing.