Any tips for newbie investors?
The most basic unit of investment avail able to private US citizens, who don't otherwise have access to the inner workings of Wall Street, is the stock.
A stock is often referred to as being a piece of pie of a company. The value of your piece of the company or stock, depends on how the company performs. Investing in stocks is essentially investing in the success/failure of a company.
Once you hold a part of a companies stock, you are considered a "share-holder." By owning a share, you have basically paid that company $ for the privilege of owning
x amount of their business. They take your $ and then re-invest it into literally whatever they want (more reasons mentioned below). And you, even if it's just one stock out of millions, you now technically own a piece of the business.
There are different types of "shares" or stocks called outstanding shares or voting shares. If you control >50% plus one share of either then you are a "controlling member" of that company and you get to make decisions that affect the company. Think shark tank when they haggle over the percentage of stake or ownership they will get.
Most of us are not controlling members. And most companies start out private, meaning most public members of the stock exchange never get in on new companies that just started issuing shares. However, once a business goes "public", that means they have gone through a bunch of regulation and registration to get the privilege of opening their stocks for purchase by any and everyone. This is a privilege because there are many benefits to "going public."
1) Owners and venture capitalists get the ability to sell some of their share for a profit. Mark Z. got about $1 billion dollars once Facebook went public AND still retained his controlling member status because he had so many shares.
2) Going public generates capital, which is just another word for resources; in this case mo'money. With mo'money, a company can take the stocks that the public buys and do a bunch of things: pay their debts, pay their venture capitalists when they "exit" or sell their % of shares (think shark tank, when Mark Cuban buys a percent of a company at value 1million, he then gets to sell his percent for a profit once that company is then worth say, ten million).
3) Increasing value of company; more shares in a company means that the market thinks that Sullen-burger Inc, is highly valuable...as long as we say it is. When people buy a stock for a high value, that increases the companies value. When they think it's worthless, then they "exit" and start short-selling or selling their shares at a much lower value.
Now to answer your question more directly:
There are many forms of trading, and for beginners I recommend finding an online broker for stocking investing that specifically caters to the average newbie like us. There's a lot of them,
E*trade
Fidelity
Ameritrade
Charles schwab
and more:
https://www.nerdwallet.com/blog/investing/best-online-brokers-for-stock-trading/
These are great for beginners because they have
A)
Low to zero start-up costs...some require a starting account minimum and some don't. This is personal preference.
B)
Promotions where, if you match a first-time deposit amount, you qualify for a bonus. As in: start an account with us with 500$ and we will give you $500...now you have $1000..I would take advantage of these.
C)
Low or no commision costs, which is just a term for the fees for every buy or sell order you give an order. You want these to be low.
Now to trading.
Stocks. Your most basic unit of investment is usually the simplest. Buy and trade
n number of stocks of a company and sit on them. Wait minutes or days (day trading) before you sell them, or wait months and years (the average person). Remember though, nothing is for free, so whatever you divest is usually subject to a capital gains tax. Stocks can be low/high risk, low/high reward. They become less risky and more valuable the more you know about the sector of the market you're investing in, the company you bought into, and external financial factors..to name a few.
Day trading, while it is high reward, is extremely time consuming and unlikely to be the easiest way to introduce yourself to investing. It also costs you every time you "order" a trade, so you need to be extremely careful that you're not paying out more than your trades will actualy get you.
Index trading....this is where you purchase a piece of a market. A market just means, the sector of economy where businesses are all doing the same thing, like manufacturing or sales or electronics. Think of the Dow Jones Index. When you trade share of an index, that represents hundreds if not thousands of companies. This is low risk and low reward, because the aggregate successes and failures of those thousands of companies is the value of your index, and not on an individual basis.
ETFs...these are stocks of an index. It's basically buying the piece of a pie OF a piece of a market. Investing gets even more meta than this. Low risk, variable return.
Mutual Funds, you buy into a pool of money that one person or one brokerage is then responsible for investing. You don't really get to choose much of what they buy after you've bought into it. These are usually pretty secure and often used by employers for their employee's retirement income plan.
Bonds, Treasury bills, 401ks, IRAs, Roth IRAs, and many many other things also exist. There's honestly so much more that I can't list because I don't understand about investing, so I will say if you're really serious about investing; Google. Just start googling and reading. It's one of those things where, the more you learn about it, the more you realize you don't know.
But it is a fun hobby and you're bound to make more than keeping savings in a bank with %0.01 interest. PM me if you'd like more info.
My source for most things in the post:
http://www.investopedia.com/
....and here's some cool investing show/movies for fun:
Shark Tank - Great show. they don't talk as much about the stock investment aspect as they do the business aspect, but it's still giving you some insight into how investment works.
The Big Short - GREAT movie. Everyone should watch. I feel like if we don't understand what caused the collapse then we'll be doomed to repeat it. Think Wells Fargo and their shenanigans.
Forbes- I don't read this site too often, but every now and again they have some great articles explaining current events or difficult financial concepts
Runescape- this RPG game has an in-game mock-exchange where players can buy and sell almost anything. Great way to practice without losing real money.