By Megan Sayles,
AFRO Business Writer,
[email protected]
It’s never too late to start investing in the stock market, but starting while you’re young gives your money more time to grow. And contrary to popular belief, you don’t need to be rich to buy stocks.
“The stock market is essentially a marketplace where people can buy and sell shares of a company. When you buy a stock, you’re essentially buying a small piece of that company, and the prices of the stock go up and down based on how much people are really willing to pay for it,” said Schelo D. Collier, founder and CEO of Black Women Invest. “This is typically influenced by the company’s performance.”
Collier started Black Women Invest in 2019 to provide a community for African-American women during their investment and wealth-building journeys. Today, the organization has more than 13,000 women from across the country.
One major stock exchange in the U.S. is the National Association of Securities Dealers Automated Quotations (Nasdaq). According to Brittanica, the stock exchange is an “organized market for the sale and purchase of securities such as shares, stocks, and bonds.”
The stock market is not exclusive to adults. Although brokerage accounts have a minimum age requirement of 18, parents and guardians can open custodial brokerage accounts on behalf of their children, enabling them to begin investing and saving for future expenses.
“I think you should start investing as soon as you hear about it. If your parents can invest for you and set up a custodial account on your behalf as a minor, that’s ideal,” said Collier. “Even if that’s not your story, you can start investing for yourself as soon as you turn 18.”
When it comes to buying stocks, Collier recommended that individuals invest for the long term rather than chase the performance of current trends. They also should refrain from trading stocks too often or day trading.
“Don’t try to time the market. Instead, focus on the companies that are going to grow and that you believe have the potential to grow over time,” Collier. “Don’t trade too often. One thing that people don’t realize is that you end up paying more fees. Typically, if you become a day trader or you are holding onto a stock for less than a year, you pay a higher amount of taxes.”
Although it’s normal for the stock market to fluctuate, when stock prices significantly fall or rise and are expected to continue to do so, it’s referred to as a “bear” or “bull” market, respectively, according to Britannica. The former is often associated with a suffering economy and climbing interest rates, while the latter is associated with a strong economy and a declining unemployment rate.
Schelo D. Collier is the founder and CEO of Black Women Invest, a community for African-American women looking to share in each other’s investment journeys. Collier her top recommendations which include starting to invest in the stock market as soon as possible. (Photo Courtesy of Facebook)
It’s also important for people to diversify their investment portfolios, especially because it’s unlikely that a person will be able to choose the perfect stock every single time. Collier suggested that individuals invest in index funds, which are a collection of stocks that are designed to reflect the performance of an existing stock market index like the S&P 500.
According to Collier, African Americans tend to participate less in the stock market compared to their counterparts due to a lack of access to financial education and trust in the U.S. financial system.
“It is extremely important for us to participate in the stock market regardless,” said Collier. “Because, for example, whether we feel untrustworthy of the stock market or not, it doesn’t matter. The stock market is still trending upwards. It’s something that we shouldn’t overlook.”
Samonae Carter, an airport manager and pilot, joined Black Women Invest in 2019. She was looking for new avenues to generate income and wanted to glean a better understanding of investing.
Before joining the organization, she was scared to venture into the stock market.
“The common concern was just the stock market being very confusing and then me doing something the wrong way and losing money,” said Carter. “But, the amount of time I thought it may take to invest toward learning how to be perfect was my main concern. I didn’t think I had time for it.”
Now, Carter leads the Black Women Invest chapter in California. She said index funds have become her obsession. She likes that they are simple to invest in and that they don’t require large investments.
“You just invest a small amount, and you can keep doing what you love, whether it’s your career or a business. You keep investing a small amount every month, and as it compounds over time, you can keep living the same lifestyle that you want,” said Carter. “You could be a millionaire with not that much effort in 30 to 40 years.”
Megan Sayles is a Report for America Corps member.
The post Investing 101: the basics of the stock market appeared first on AFRO American Newspapers .
