Investing 102
Welcome to Investing 102, the second part of our article series about Investing. This article will explore more concepts about the stock market and how the two parts of investing work.
If you read Investing 101, we mentioned the two aspects of investing early: time and money. Using this article, we will aim to understand better why these factors matter when growing your wealth. Of course, many factors go into investing, but we want to keep this as simple as possible.
The first aspect is time. We always need more time; there are always more things to do than time to do them. This relates to investing; the more time you invest, the better you will be at it, and the more your money can compound. Check out this chart below, which shows the power of compounding through investing in the stock market.
This chart uses an example of investing $5 daily ($1,825 per year) for 50 years. Over 50 years, your initial investment of ~$91,000 could be worth 1.4 million! This is not to discourage you from buying coffee but to provide an example of the power of compound interest.
The second part of investing is money; as mentioned above, it becomes powerful over time. Now, you may be in a place financially where you could afford to invest the money every day, but you might not be. Many brokerages (Companies that provide an account to trade stocks and other investments) can invest with as little as $1.
Now that you know the possibilities of investing, how can you start? First, you need to open a brokerage account. A brokerage account is a financial account used to buy and sell stocks and ETFs. Many companies offer brokerage accounts, such as Charles Schwab, Fidelity, Vanguard, Robinhood, and more. You will need to do some research to find out which is suitable for you. After your account is set up and approved to fund, you must move money from a bank account to the brokerage account. After that, you’re all set to begin investing! Investing 103 will cover a few ways to pick quality stocks, investing strategies, allocations, and much more.
All information in this article is for educational purposes only and should not be considered financial advice. Do your own research and consult a financial advisor for advice.
Financial data provided by Google Finance.
