Women are investing in the stock market at never before seen rates. The influx of female investors is fantastic news for evening out the gender wealth gap. If you are a woman looking to get started with the stock market, this article will give you a great overview. Keep reading for my stock trading for beginners guide!
Stocks should be an important part of your wealth building strategy.
What Are Stocks?
Simply put, stocks are little pieces of a company an average person can own. They may or may not entitle you to benefits, such as dividends or voting rights. People typically buy stocks because of the low current price and the expectation of a future increase in value.
Buying Shares in a Company
Buying shares and buying stocks are the same thing. But don’t let that fool you! There are a lot of nuances when it comes to owning these shares: dividends, different types of stocks, how to buy them.
For example, did you know that it’s rare for companies to pay dividends to shareholders? What about not needing a stockbroker to buy stocks?
The stock market is a complex world – but one that you most definitely will understand if you give it time.
What Are Dividends?
Dividends are payments to shareholders from a company. While dividends exist, owning a stock does not entitle you to receive them. There are different types of stock, and most of them do not yield dividends.
Most people make money buying and selling stocks rather than waiting for dividends on a monthly, quarterly, or yearly basis.
How to Invest in Stocks
There are multiple ways for you to invest in stocks. You can do so via a stockbroker, apps on your phone, or websites on your computer.
Before you decide to spend money on any given stock, you should take your time to do research, not only in different stocks but in different ways of investing. There are a lot of stock trading strategies for you to try. We highly recommend long-term trading when it comes to stock trading for beginners.
Research Stocks
There are countless ways to research stocks – some of them are free, others cost money. For a beginner, the best way to handle the information is to do so with whatever you can get for free.
Take advantage of social media, read free books, and enroll in a public college course (if you have the time).
If you’re interested in the stock market, the information below will help you dip your toes in the financial pool.
Blue-Chip Stocks
A blue-chip stock is the stock of a company that has a pristine reputation. We’re talking about the best companies in the world like Google, Amazon, or Coca-Cola. You know you’re putting your money in a long-lasting company when you buy a blue-chip stock.
Does that mean your stock portfolio should have nothing but blue chips? Absolutely not! You should always diversify your assets; sometimes, that means taking a chance with lesser-known companies.
Preferred Stocks
Preferred stocks are a special type of financial instrument that offers more benefits than your average stock would.
This type of stock usually comes with higher dividends than usual and a few other benefits that are a little complex for a guide about stock trading for beginners.
For example, if a company is having a hard time and decides to suspend dividend payments, preferred stocks owners may still get their monthly payments anyway.
Contrary to popular belief, preferred stock owners do not get voting rights in companies.
Finding Good Stocks
Believe it or not, the best stocks are hiding somewhere in social media. That’s right! If you love spending time on Instagram or Twitter, you should spend some time following finance-related accounts. That’s where the information first hits. After a while, it moves on to TV – and, by then, it’s too little too late!
You can also subscribe to YouTube channels dedicated to stocks as well. Try to follow content creators that explain why a stock is good on layman terms over charts and math-driven data (which isn’t beginner-friendly).
How To Buy Stocks
If you’re a complete beginner, the best way to buy stocks is to not do so yet. It may sound confusing, but it’ll make a lot of sense in one second.
Stocks are very volatile. What seems to be a good idea can crash to the ground in seconds. Because of that, you should grab a piece of paper and write what stocks you want to buy (and how much).
Imagine you bought them already, and wait for a week. See whether the price went up or down, erase the stocks that aren’t doing so hot, keep the ones that worked, and do more research. After a month of doing this, you’re ready to buy stocks.
After you have a tried-and-tested strategy lock-and-loaded, you can decide whether to buy stocks through a stockbroker or try a more modern approach.
Often, for beginners, the best thing to do is invest your money the S&P 500, through an ETF such as the Vanguard 500 Index Fund ($VOO).
Choosing a Stockbroker
For a lot of people, a stockbroker is a professional you can call to buy or sell stocks. While that was the way you had to do things thirty years ago, there’s no reason to keep up with the old ways. Nowadays, you can trade stocks without a stockbroker – and do so through your phone using an app.
There are countless options for you to try: eToro, Robinhood, TD Ameritrade, Charles Schwab, Fidelity, and many more. You should download at least three of them and try them out. Delete whatever doesn’t feel comfortable and start buying stocks!
Selling Stocks
Back in the day, you had to call your stockbroker and tell them to sell a stock before you could turn a profit. Nowadays, thanks to apps and websites, you don’t have to go through all that hassle. Selling stocks is as easy as buying them – and you’re one click away from doing that!
If you have a stockbroker running things, you’ll have to talk to him to sell.
Before you sell, make sure you’re not panic selling, though. That means getting rid of a stock because of a dip or bad news on TV. You should always take a deep breath and think it through before buying or selling stocks.
Stocks for Retirement
When it comes to stock trading for beginners, buying long-term is the best strategy possible. Day trading (i.e., buying and selling stocks every day trying to make a quick profit) is a sure way to lose money for most people.
You have to buy stocks from solid companies and hold them for decades – that’s how regular people make money in the stock market!
If that sounds like you, you should look for companies that have been around for more than a decade and look like they will last for a couple of decades more. Avoid new things, fads, and ideas that seem to be too good to be true.
What Does it Cost to Trade Stocks?
There are three extra costs to trading stocks: a commission for buying, another one for selling, and taxes if you made a profit. These three trading costs are based on the price of the stock you want to buy or sell.
So, when you buy a stock, you’ll probably pay a 1% commission for buying it. When you sell the stock, you’ll pay the same percentage – and you will also have to pay taxes if you made a profit.
For example, let’s say you buy a stock worth $100. You’ll have to pay an extra $1 (1% of $100) for buying it. Let’s say it goes to $120. If you sell, you’ll make a $20 profit minus the $1,20 expenses (assuming the selling commission is also 1%). So, you get $100 from your initial investment and $18,80 of profit.
And after that, you’ll have to pay taxes on the $18,80 (profits) left.
When do you Pay Taxes on Stocks?
Unfortunately, it’s hard to answer when you have to pay taxes on stocks because it varies from state to state and country to country. In general, you’ll have to pay a specific tax on a yearly basis depending on how much money you made trading stocks in the last twelve months.
With that being said, it’s not a bad idea to talk to an accountant to figure out the best tax strategy (not only for stock trading for beginners but for overall income and expenses). There are a lot of tax breaks everyone can enjoy – but not everyone knows about them.
How To Make Your First Stock Trade
There’s no foolproof way to prepare yourself for your first trade. The best strategy possible is to read, watch videos, and inform yourself as much as possible before you hit the buy button.
You should also determine your investment strategy before you do. Write down how long you want to keep that stock. Will it be a month? Three months? More than a year? Whatever it is, make sure you forget about that stock after you buy it for as long as needed. If you check on whether it went up or down every day, you’ll sell after ten minutes.
Are There Alternatives to Trading Stocks?
There are lots of interesting alternatives to trading stocks you can try. You have to keep in mind they’re more volatile than the stock market – and, in some cases, not as safe to trade.
The number one alternative to stocks is decentralized finance. It sounds scary, but you probably know about it as cryptocurrency! Both Bitcoin and Ethereum (among other options) are great ways to invest money without going through the tedious struggle of looking for stocks to invest in.
For a more safe alternative, you can look up US bonds. They are the exact opposite of the cryptocurrency market: safe and non-volatile. Then again, since they are less risky so the reward is also smaller.