What is a Hedge Fund? | What is the Stock Market?

Should You Buy Stocks Online?

last updated

Do you have money in the market? Who buys stocks for you? If you're letting someone else invest for you, you may be losing money!

Should You Buy Stocks?

Quick question: what have you invested in and why? If you can answer this question right now, great! You're well on your way to becoming an expert investor.

Otherwise, it's time to do a little soul searching. Suppose your day job is making guitars. You probably know a lot about the right kinds of wood to use, what you can get out of various types and sizes of strings, and what kind of body shapes make which sounds. You probably also understand the business and customers, like who buys which types of guitars and what you can sell them for. In short, you know your business.

If someone came to you with a great business opportunity to make and sell more guitars but didn't know the difference between an acoustic or an electric guitar or why you want nylon strings in one situation and bronze in another, you might question that opportunity. After all, someone who doesn't understand a business is going to have more trouble making money than someone who knows it inside and out. (Though see The E-Myth Revisited to learn why merely knowing how to do a job is no guarantee of business success.)

The same rule applies to your investments. If you've socked your money away in pharmaceutical companies but you know the petroleum industry, how will you distinguish between a great stock and fool's gold?

Can a Broker Pick Good Stocks for You?

A lot of people use investment brokers to manage their money, thinking that investing is complicated. (You're a wonderful exception; you're already learning how to invest on your own.) What these people don't realize—or don't have confidence in knowing—is that stocks represent real companies in real industries, and all of the things they understand about their business and customers apply to the stocks they might buy.

A broker might have your best interests in mind, but a full service broker will charge you for this privilege. You're paying someone else to buy what he or she thinks will make money, based on whatever criteria your broker finds important. (If your broker's goals aren't your goals—if your broker makes more commission money by trading certain funds or by making frequent trades—you may be losing money.)

How to Buy Stock Online (for beginners)

What's the solution? Is it really possible to learn how to buy stocks yourself? Yes!

It's easy to start investing on your own; pick a discount stock broker and set up an an account. Then buy an index fund like the S&P 500 fund, and be patient. (Seriously; investing $1000 can take half an hour and earn you a nice return year over year.)

There's more to it than that, but that's as simple as investing can be, and you can do that! Once you've taken that first step, you'll know more than most people, and you will have started to take control of your own investing future!

Buying stocks online can be safe, and if you're cautious and do your research (you've already started to learn how the stock market works), you can watch your wealth grow. It'll take time and patience, but you're making good progress.

Most of all, you've trusted your money to the person who knows your goals the most and who has your best interests most in mind: you. All that's left is to answer the question of when should you buy stocks—and what better time than now?