Investing in stocks - how it works and how to start
BOSTON - Investing in the stock market can seem like a daunting task, but with the right help you can start saving for the future.
James Royal, a senior analyst at Bankrate, offered some helpful advice and an explanation of what the market is all about.
• When you're investing In a stock, you're investing in a piece of a business or company.
• The performance of your stocks is based on how well the business is doing.
• The way you buy, sell and manage your stocks is through what's a called a brokerage account.
• You can handle your own stocks or pay a professional
If you have interest in individual stocks, paying a professional is generally the more expensive management option, but for some it's worth it.
"If you want to pay a financial advisor to do that, they're going to take a fairly significant amount of money to get started and then they may take as much as 1% of your money every year, just to manage your business affairs," Royal told WBZ-TV.
There's also a robo advisor.
"You pay a pretty small fee and you can basically start with any amount of money and they'll design a portfolio of 5 to 10 stocks or so that will generally perform well over a period of time. So, robo advisors are a great option for people who are just trying to get their sea legs and figure out where they need to go and how it all works," said Royal.
He said one of the easiest options for beginning investors is the S&P 500 Index Fund.
"An S&P 500 Index fund is a great way to own the market and get the market's long-term returns over time. And you don't have to do the analysis that you would with an individual stock. The other aspect about what's great about an S&P 500 Index Fund is that in terms of what they own, they're all the same. They all own the S&P 500 Index stocks. Where they differ is in cost, but the thing is S&P 500 Index fund costs are very, very low. You would pay between $3 and $10 a year for every $10,000 you have invested in the fund. So, the costs are tremendously low. And that makes it particularly attractive for investors, plus these days," Royal said.
The other thing you'll need to consider, of course, is how much you plan to invest. On those days, when it feels like it's getting tough to put money away for this you have to remember, this is a long-game to wealth and it could take years or decades.