Does your idea of investing involve an old coffee can with a slit in the top or a cute little pink piggy bank that oinks when you insert a quarter? That was okay when you were eight years old, but now that you have an eight-year-old, it might be time to start thinking about what to do with your money to help secure a future for yourself in your old age and your children as they mature.
First of all, that piggy bank is a way of saving money, not investing money. Saving money means you let it accumulate by your own hand; in other words, you make it and you put some away. There is definitely nothing wrong with that. Too many of us don’t have enough savings to do much with, but if you want to really make your money grow, you need to invest it – that is, put your money in places where it will grow even without your having to break your back to add more to it. That is the difference between saving and investing – money in savings accumulates while money invested “goes to work” for you and makes more money for you.
The Stock Market
When you invest in the stock market, you are actually buying a small piece, or share, of one or more companies. A share of stock, even a single share (if your company sells shares in such a low quantity) makes you partial owner of the company. Therefore, you become invested in the performance of that company. If a store shows a profit at the end of the year, that store’s owner has more money, right? Same thing with the stock market. If your company shows growth (makes money), you make money because you are part owner of that company. Of course, most shareholders don’t get involved in the daily operation of the company in which they purchase stock; you simply try to buy the stock while it is relatively low-priced and sell it at a higher price.
When you add numerous shares of stock into this equation, the potential to make a bigger profit increases exponentially. The more you have to invest, the more you can make with the same amount of effort. That is not to say you must have millions of dollars to be able to invest in the stock market, of course.
Most investors, unless they come from a background of wealth and have grown up observing the ins and outs of investing, necessarily have to start small. And surely there will be mistakes along the way, but unless you want to endure long hours of toil to get money, you must start an investment portfolio.
It pays to do your research on a company before making a purchase of their stock; the more you know about what a corporation actually does, the more you can feel confident in your decision to buy into it. In addition to your own research, it is also wise to get a stockbroker in whom you have confidence. Stockbrokers are experienced in reading the trends and dealing with the daily fluctuations of the market, so they can be a valuable tool to both novices and professionals alike.