Let’s help you wrap your head around the stock market and investing in stocks.
If you’re having a hard time understanding a lot of the lingo, if all the charts and graphs go right over your head, you’re not alone. And there is nothing wrong with you.
Let’s take a few steps back, right back to the ground level, maybe even get our hands a little dirty. 😉
A simple way to look at investing in stocks…
Think of your stock portfolio as a garden. The plants are shares of companies (stocks).
You design a garden that balances your needs and wants. Maybe a mix of flowers and bushes, vegetables and herbs.
It depends on what you want to get from the garden.
Do you want:
- a harvest every season?
- a garden that helps pollinators?
- hearty bushes that will be around for many seasons?
- Or do you like exotic, rare plants?
It’s the same for a stock portfolio. It’s a collection of shares in companies that serve different purposes. How you design and structure your portfolio depends on what you’re hoping to get out of it.
There is always something to grow. Some plants may be harder to get depending on the season and climate cycles, but there will always be plants to put in your garden.
It’s the same for stocks. There will always be businesses to buy shares of.
Over 1 billion shares are traded every day on the New York Stock Exchange. There will always be a seller for the stocks you want to buy. There will always be a buyer for the stocks you want to sell. All for the right price, of course.
What do you want out of your garden (portfolio)?
Now, different types of flowers serve different purposes. It’s the same for stocks:
There are blue chip stocks (just a nickname they were given a hundred years ago). These are companies that have been around forever and have been profitable for decades. The price of their shares generally grow slowly and they’re better for long-term, safe investing.
These are like your perennials, or your heartier plants. Like the Brunnera in the picture here, they are the plants that don’t take as much work, and even if bad weather hits, you know they’ll be there next season.
(Thanks to Candy at Venni Gardens for this photo.)
There are growth companies that are much more volatile. Their price will soar and you can make a lot of money, but there’s also the risk of their price tanking. These companies can still do well long-term, but you have to endure a lot of ups and downs.
These are like your exotic plants, or the pretty but finicky plants. They need a lot of attention because if you’re not careful, they can wilt and die without a moment’s notice.
Now, many companies pay a dividend every quarter. This is a cash payment to shareholders. It’s a portion of the company’s profit.
These are like your vegetables. You actually harvest something from them. Generally these companies aren’t growth stocks so they may not shoot up quickly but they’ll stick around for a very long time. (Thanks to Kandi at Zone 3 Vegetable Gardening for this photo!)
So again it comes back to what you want to get out of your garden. Some people want to grow vegetables, other people just want flowers. Many people will mix their flowers and veggies to strike a balance that suits them just right.
It’s the same with stock investing.
What kind of gardener (investor) are you?
There are dividend investors who primarily hold stocks that pay out dividends. They want to collect income just for holding shares. So they continue to build a portfolio (garden) of dividend paying companies.
The biggest difference between dividend stocks and vegetables is that dividend stocks barely need any attention. Whereas some vegetables can be finicky. And you have to replant vegetables every year, you don’t have to rebuy dividend stocks every year. Although, as long as you keep adding to your portfolio, your dividend income will grow.
Other investors want growth stocks. They want the colorful flashy companies who are popular right now. They want to buy low and sell high, fast. Although, not all growth investors are looking to get in and out of the stock quickly. Some truly believe that certain fast growing companies will continue to be worth more over time.
Most people will have a mix of dividend and growth stocks in their portfolio. They’ll also mix in things like gold and silver, maybe some bonds as well. It depends on what you’re looking for from your “garden.”
How do I actually start buying stocks?
There three steps to start buying stocks.
- Open a brokerage account.
- Deposit money.
- Buy ETFs
What is a brokerage account, and what are ETFs?
I go into much more detail about that in “How to Buy Stock NOW! :)”
It’s a step-by-step walkthrough showing you how to set up an account that lets you buy stocks. It also explains more about the stock market and ETFs.
So if you think you’re ready to start buying stocks, then click here to download the walkthrough and get set up.
If you’re still not certain about investing in the stock market, shoot me an email. I’m not an expert, but I can send you resources that have helped me.
And take your time. There’s no rush. Know where your money is going and what it’s doing.
When you do start investing, let me know. I love stock chatter! 😊
All the best,