Deciding what companies to invest in can be confusing for those in their 20s who are just starting to learn about Wall Street. That is why we offer the same piece of advice on how to invest in stocks, no matter what the economic climate; buy what you believe in. It’s so important we made it one of ‘MyWallSt’s 6 Golden Rules’.
Did you know that almost every member on the Forbes 400 wealthiest Americans list in 2019 owned a block of shares in public and private corporations? Makes you think, right? If you want to follow in their footsteps, keep reading for more tips!
How to invest in stocks
Once you have your short-term financial matters under control, it’s time to look towards creating sustainable long-term wealth.
1. Decide your risk attitude
The first thing an investor must decide is their investment risk attitude. Investors in their 20s can afford to take more chances in the stock market as they have more time to invest and can ignore much of the short-term volatility in share prices. When you first start buying stocks, you’ll most likely see drops in your shares in the short-term, but history has taught us that investing for the long-term will come out ahead. Between 1989 and 2019, the average rate of return on the S&P 500, which is considered a benchmark for the U.S. stock market, was about 9.4%. If you prefer to limit as much risk as possible, you can keep it simple by investing in an ETF like The Vanguard 500 Index Fund. Read more about ETFs here.
2. Invest in stocks you use everyday
We believe that the average person knows a lot more about the stock market than they think, as the stock market is just a collection of the companies that we all interact with everyday. Do you use an Apple iPhone? Do you drive a brand new Tesla? Or maybe you’re trying to pick between a Disney+ or Netflix subscription to watch with your family. These are all companies that we interact with everyday and ones we can invest in right now.
3. Set up a brokerage account
The next step to investing is creating a brokerage account, which has never been so easy as everything can be done online. It normally takes a few days to have your account approved.
Usually you will need:
- A proof of address
- Proof of identification
- A bank account for you to transfer funds from
Criteria to consider when selecting a brokerage account includes:
- The minimum required deposit amount. Some brokerage accounts require a minimum deposit of $10.
- How much it costs per trade. Brokerages can offer commission-free trading, but others do not. This is a very important consideration as fees can eat into your profits.
- What method of deposit does the broker accept, i.e wire transfer, debit/credit card transactions, PayPal.
- Can you trade in fractional shares? For example, are you allowed to buy $50 worth of Microsoft stock instead of an entire share?
- Low commission fees on trades ($0.01).
- Option of buying fractional shares.
- Lots of funding options.
- A breakdown of your portfolio in the MWS app.
Something to remember…
Investing in stocks will also protect your portfolio from the effects of inflation — the decrease in the value of money over time as wages remain stable and the cost of living goes up. The physical makeup of money doesn’t change, but its purchasing power in the future market will have decreased. Check out this inflation calculator to see how much money you can lose by just keeping your money in a bank account.
Ready to start investing right now?
The MyWallSt app is here to help. Download it now to receive the top 1% of investing opportunities straight from Wall Street to your phone every day.
With the subscription you will also receive:
- Our stock of the month – our favorite company of the month, chosen by our team of analysts.
- A portfolio that can securely link to your brokerage account for seamless buying, selling, and monitoring of your portfolio.
- An investing team that is on-hand to answer any questions.
Read the entire ‘How To Start Investing In Your 20s’ series here:
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.