Investing is something that young professionals should be considering doing with their money, either in a retirement 401(k) or IRA, or in a general brokerage account. Other investments like keeping your money in a savings account just won’t cut it in terms of long-term growth, or even inflation. However, as important as investing in the stock market is, many young professionals find it overwhelming, and confusing. This post aims to help clear up some of the confusion!

The stock market is basically like an auction house, where investors can buy, sell, and trade-in stocks and businesses’ shares. Even someone like you, with a little research and prep work can dive into the world of stocks and (hopefully) earn a nice return! But, in order to start buying and selling stocks, there are a few things you’ll need to know.

via Pexels

Different types of stocks

Before making your first investment, it’s important to understand what the basic types of stocks there are. Of course all stocks are just ownership shares in a company, but there are different types of companies that you can choose to invest in. There are four different types of stocks, namely:

Blue Chip stocks: Blue chip stocks are companies that have been around for decades and are steady in their continuity. Although these companies don’t usually see a spike in their stocks, they are the most reliable to invest your money in, seeing as they are rooted and are not likely to go anywhere or crash. Often times they have a consistent dividend, which is another great return for you aside from price appreciation. Examples re: 3M, Johnson & Jonson, or AT&T.

Speculative stocks: Considered the riskiest of stocks, speculative stocks are companies that have no real pattern or principles. These companies’ stocks rise and fall all the time, creating a very uncertain future for their shareholders. As fun/exciting as they may seem, it would not be very wise to invest a ton in speculative stocks, seeing as anything can happen, and there is a much higher chance for you to lose money than with other stocks. Examples include: new tech companies or new popular companies that you see in the news a lot.

Range Bound stocks: These stocks are from companies that have plateaued and don’t really show a rise in profits. Investing in these stocks means that you won’t see a lot of price growth or decline, just a steady price. You should invest in the stock market with the goal of growth, so consider carefully if you find yourself looking at a stock that is a little too consistent in price. I like to see slow and steady growth in stocks that I’m after.

Growth stocks: These are the most popular of all the stocks. Growth stocks are from companies that are booming and are showing favorable figures in turnover and profit. Although these companies aren’t as old as those associated with blue chip stocks, they can be much more expensive due to the high amount of investors and popularity. Examples include: Netflix, Shopify, Facebook.

How to buy/sell stocks

To actually participate in the stock market as a buyer or a seller, you’ll need a brokerage account. A brokerage account is where you’ll move your cash into, and then from there you can buy and sell. Common brokerages are sites like Charles Schwab, eTrade, Vanguard, or even RobinHood (but I’m still mad at them after their boondoggle with the GameStop stock).

Setting up a brokerage is easy to do and within a few days once verified and money has been moved in, you can be up and running trading stocks! Another benefit of a brokerage is record keeping – you do have to pay taxes on gains (but can deduct losses) but a brokerage makes that process come tax time easy!

How to get familiar with the stock market

Now that you know what types of stocks there are to invest in, you can learn more about the actual trading process and what it entails. To start with, there is a ton of information online whether on sites like CNBC, Yahoo Finance or even YouTube. From these sites you can learn not only how to buy and sell, but also all sorts of trading patterns to spot, and also great commentary and news on the business you could be buying.

Another option would be to invest in a short online course that will enable you to learn to trade stocks. By doing this, you’ll be more confident in your endeavors and be able to tackle the stock market head-on. An actual course could require more of an investment on your part, whether with fees or your time, but could be worthwhile depending on how you learn, and how much you’d like to learn!

Summary

Investing in the stock market doesn’t have to be intimidating, confusing, or time consuming! Start doing some research, start following some stocks, and then open up a brokerage account to actually trade!

Disclosure: Some links are affiliate links that earn me a commission. I do not own any of the stocks listed in this article.