However, equities are the path to building wealth because they represent ownership of a company and a claim on future profits and earnings. An investor buys stock now, hoping that it is worth more later.
For example, a 401(k) plan will provide employees with various mutual fund investment choices. The funds are managed by an asset manager, like Vanguard or Fidelity, and the fund manager picks the stocks.
A beginner must first understand the basics of stocks. A stock is also known as a share and represents the percentage ownership of a company. For example, if you own ten shares of a company with 100,000,000 total shares, you own 0.00001% of the company.
Stocks are not risk-free. Most people are familiar with low-risk savings accounts and Certificates of Deposit (CDs) that are, in many cases, insured by the Federal Deposit Insurance Corporation (FDIC).
In the past, an investor had to deal with a broker who placed a buy or sell order. Today, orders are placed directly by the investor online. Therefore, a person should start the process by selecting an online broker and creating an account.
Opening an online account is simple and easy. First, a person must complete the application, provide the necessary identity information, and wait for approval.
Start researching a stock by reading about it in one of the many investing books available to the public regarding learning how to research and select stocks.
You may also want to consider a stock screener platform. Companies like Morningstar and Seeking Alpha offer stock screening. Some online apps offer dedicated stock screening.