The stock market presents a great opportunity to beat inflation and build wealth. For many, investing is one of the first steps on the journey to financial freedom. However, investing can be confusing for beginners. Therefore, we’ve provided this basic explanation of exactly what stocks are.
What are Stocks?
Stocks are perhaps the most common asset class for investors. They’ve been around for hundreds of years and as such are widely accepted and understood. For the most part, stocks are completely safe (the danger comes from not properly researching investments or using an untrustworthy broker).
Stocks otherwise referred to as shares, represent fractional ownership of a company. For example, if you purchase a share of Amazon, you’re technically a part-owner of Amazon. Outside of bragging rights, this comes with several benefits. Firstly, when you own enough shares of a company you’ll gain voting rights, allowing you to have some say on the future of the company. Additionally, some companies pass on a portion of their profits in the form of dividend payments. These quarterly or annual payments can be a lifeline of cash flow in a volatile market. Typically, dividend payments range from around 0.5% to 10% depending on several factors (risk, earnings per share, company reputation).
Selecting a Broker
If you’d like to invest in stocks, then you’ll need to select a regulated, powerful broker, otherwise, you may find yourself missing crucial features further down the line. Although every user’s needs will vary, here are a few aspects the team here at EconomyUniverse.com recommends looking out for.
The vast majority of modern, trustworthy brokers will be regulated. This means that they have to answer to an authoritative body, which also provides guidance on looking after customers and their funds. You should always ensure you’re trading using a regulated broker as otherwise, you’ll have no recourse if something were to go awry.
Despite security being somewhat tied into regulation, it’s certainly something worth considering in itself. Security is paramount to the success and smooth operation of any trading platform. If overlocked, the chances of losing money to some sort of attack is far higher. We recommend ensuring whichever platform you choose is regulated, has SSL encryption, 2FA, and ideally some form of insurance (FSCS, SIPC).
Last, but certainly not least, fees. Before you commit to a brokerage it’s crucial to consider the fee structure offered by the platform. If you don’t take care to research this step you might find yourself locked into a platform that changes extortionate fees. Ideally, you want a commission-free trading platform with no open order fees and minimal deposit fees.
As we mentioned every investor has different needs, but here’s a few platforms we’ve used previously and can safely recommend.
Webull – Fairly new to the space, allows trade in a range of markets including Forex, Crypto, ETFs, Stocks, and more.
eToro – One of the most popular names in the finance space, eToro, offers some unique features like CopyTrading, CopyPortfolios, and after-hours trading.
TD Ameritrade – With a track record of over 30 years, TD Ameritrade is a safe bet for any US-based investors.
Fidelity – These titans of the investment space support trade in a variety of markets, offer high-value clients a financial advisor, and even create their own ETFs.