Two Minute Money: How to get into the stock market
Welcome to Two Minute Money, Yahoo Finance’s new personal finance series offering quick explanations for some of the most important questions involving your money.
Want to invest in the stock market but don’t know how? It’s not as intimidating as it seems. In fact, if you’ve got a 401(k) or an IRA, you’re already doing it!
To invest on your own, you’ll need to open a brokerage account, which you can do online through several companies like Vanguard, E-Trade or Fidelity. These firms offer investment services, too, though typically require an additional fee. Additionally, some accounts will require a minimum balance to be opened, so check for any restrictions before deciding where to invest.
Most investment accounts have fees, and some charges are more common than others. You’ll probably see an expense ratio, which is an annual fee that’s a percentage of your investment. You might also incur a fee for every transaction you make.
Next, you’ve got to figure out how you want to invest. For example, you can invest in specific companies or an index fund, which tracks large portions of the market. For instance, the S&P 500 is an index of the 500 largest publicly traded companies in the U.S.
Keep in mind that all investments have risk. The stock market goes up and it goes down, so there’s no guarantee you’ll make money—especially in the short term. The market has historically gone up over long periods of time, so chances are you’ll be in a better position to gain if you leave your money in the market for a long time. A common investing expression is “Set it and forget it.”
Keep your expectations realistic, and your money could grow over years setting you up for great rewards down the road.
