Lots of us want to invest in the stock market, but many have not done so yet. Why? Well, some think they don’t have enough money to invest yet, and some think it’s not the right time, and others just aren’t sure how to invest. Let’s get all of these excuses out of the way, shall we? — because stocks are one of the best ways to build a nest egg for retirement.
Don’t have enough?
If you’re not bothering to learn how to buy stock because you think you’re not rich enough, think again. You really don’t need a lot of money to start investing. You don’t have to buy at least 100 shares of a stock, either. You can usually buy as little as one share of a stock, though you do want to keep your commission costs under control. Paying, say, $10 to buy a $10 stock is a bit much. Low trading rates abound, and with a $10 fee, you can spend $500 on a stock or fund and only be paying 2% in commissions.
Plenty of brokerages charge relatively low fees (such as $10 or less per trade) and have low minimum investment requirements to open an account, too — sometimes just $500 or even no minimum at all.
It’s too soon or too late?
If you’re thinking you don’t need to worry about how to buy stock because you’re too young or too old to invest, you’re wrong. Young folks may not have much money, but they’re rich in something most of us are far poorer in: time. If you invest just $1,000 at age 15 and it grows for 50 years at 10% annually, you’ll end up with more than $117,000 at 65. If you start with $5,000 at age 25, it can turn into almost $600,000 by age 75. Add more along the way and you’ll be even richer.
Meanwhile, many people make it to age 90 or beyond. If you’re 65 today, you might still have a good 25 years ahead of you, if not 35!
You don’t know how to buy stock?
If you don’t know how to buy stock, you’re not alone. Few of us are ever taught much about investing. Fortunately, the basics are pretty simple. You might, for example, just park most of your nest egg in a few low-cost broad-market index funds SPDR S&P 500 ETF Trust (NYSEARCA:SPY) (which tracks the S&P 500) or Vanguard mutual funds or ETFs. (ETFs are exchange-traded funds, and are kind of like a cross between a stock and a fund.) You can include bonds easily, too.
With most mutual funds, you can open an account directly with the mutual fund company — such as Fidelity or Vanguard. Click over to their website and you’ll be able to either fill out account application forms online or download them to print, fill out, and mail in — with a check to fund the account. You can open regular accounts or IRA accounts, which offer tax advantages and come in traditional and Roth forms. You can also buy most stocks and a wider range of mutual funds through regular brokerages, which try to make the account-opening process simple via their websites.
Learning how to buy stock is pretty easy, but figuring out what to invest in can take a little more time. Consider keeping it simple, with index funds, at least until you’re comfortable with fancier fare, such as individual stocks.
The article How to Buy Stock Now — and Why You Should originally appeared on Fool.com.
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