Investing in stocks, explained in 6 questions

Individuals 03.28.2022 2 MIN

If you’re at the beginning of your investment journey and don’t know where to start, these six questions will give you an introduction to stocks by explaining the what, why, who, where, when and how.

1. What are stocks?

Investing in stock gives you ownership of a piece of a company. Also known as “shares” or “equity,” stocks play an important role in many investment portfolios. Certain investments carry more risk than others. To better understand risk and its impact on your portfolio, check out our risk tolerance article.

2. Why do they matter?

Stocks allow you to build wealth and diversify your investment portfolio. People invest in stocks for a variety of reasons, but primarily it’s to get a return on investment. When you purchase stock in a company, you’re investing in the success of that company. The expectation is that over time you’ll earn a return on your investment—either because the stock price goes up or the stock pays dividends to its investors.

3. Who can purchase stocks?

The minimum age requirement to open an account varies state to state. Depending on where you live, you have to be at least 18 or 21 years old.

4. Where are stocks traded?

Stocks are primarily bought and sold on exchanges, like the NASDAQ or the New York Stock Exchange (NYSE). Think of these exchanges as places where buyers and sellers are constantly trading goods of value—like any other marketplace.

5. When can you invest in stocks?

You can buy stocks at any point in your adult life, but the longer you hold a stock, the more likely you are to realize long-term value. Here are some market trends to consider as you begin looking into investing.

6. How can you invest in stocks?

There are a few options, depending on your situation:

Your company’s retirement plan, like a 401(k), is a good place to start. A 401(k) will typically include a mix of stocks and bonds. Ask your company’s HR team for plan options and what types of stocks your plan can be invested in.
If your company doesn’t offer a retirement plan or you work for yourself, you may consider an Individual Retirement Account (IRA), which will typically contain some stocks.
You can look into an individual brokerage account, which is an account in which you can invest your money. Spend some time researching your options to understand what sort of support you’d like. Look into assistance in researching and selecting stocks, investment advice, and access to human support. You should also understand what sort of fees are associated with the account, as well.

Learn more about the differences between saving and investing, and investing in companies that might align with your social values.

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This article was originally published on marcus.com.