By M Katie Helle, CPA –
You may regularly hear in the media, talk about trading on the stock market and the highs and lows that often occur. As a young adult, you may not understand the stock market and how it works. The stock market is where you (the investor) can buy and sell shares of common stock in publicly traded companies. Examples of some publicly traded companies you may be familiar with are Apple, Starbucks, and Netflix.
Often, supply and demand help to determine the price of each company’s stock. The goal is to purchase the stock when the prices are low and sell the shares of stock when prices are high to yield the largest return on your initial investment. The health of the economy also plays a huge role in the stock market and a company’s profitability. Because our economy seems to work in a cyclical cycle, there have been periods of highs and lows. The first stock market crash occurred in 1929. This was a four-day collapse of stock prices marking the worst decline in U.S. history. There have been a handful of other crashes since then with the most recent being in 2008. Although scary to some, the market always seems to recover and build back up – something investors must learn to embrace.
Becoming a trader in the stock market, can be fun and rewarding, but takes some skill. Here are a few tips and tricks to becoming a trading expert:
- Read books and search the internet to learn about the different types of stock and decide how you want to invest your money.
- Set a budget for your stock investments. You may find a small investment account can quickly grow.
- Find a mentor or friend who may be an expert in investing and learn from them.
- Know there will be some wins and losses with your investment.
- Start investing by opening an investment account. There are several different brokerage houses to choose from. Some popular ones include Vanguard, TD Ameritrade, and Ally.
Once you start investing and actively trading on the stock market, celebrate your wins and embrace the losses.