In this 2 Minute Q&A Tuesday, we’re diving into how to investing in the stock market for beginners. A large part of investing in the stock market is learning how to pick stocks. The biggest tip I can share with you is to invest in companies you find value in. Now for a lot of us, this is much more difficult when you’re not used to investing in the stock market. To help you dip your feet into investing in stocks, let’s break down the statement of “what invest in what you use”.
Invest in What You Use
The first thing I recommend doing is to look at the companies you find value in. These are going to be the companies you’re going to want to invest in because you naturally see potential in them. The reason Warren Buffet recommends to invest in what you know is that you probably know a good amount of information on that company. You know what makes their products unique and valuable, making their products appealing to you and hopefully many others. The best way to figure out what companies are taking all your money and time is to look at the following.
1. Look at your credit card statements
A great place to find out what companies you’re spending your money at is your credit card statement. Let’s focus on the small recurring expenses that are hitting your credit card every month. I’m pretty sure Netflix and Disney + might be on the top of that list. These small purchases are very popular expenses that people tend to put on their credit cards. So a lot of times they keep these expenses even if they don’t use them a lot. But if your a mom like me then you’re probably using Disney + a lot during this pandemic lol.
The strategy here is to look at the expenses you don’t even realize you putting on your credit card. A few of the other credit card purchases can come from other companies like Amazon, Uber Eats, or even your cell phone bill. We use these services so much that we don’t even realize that we can also invest and buy stocks in these companies. This is a great strategy when figuring out which companies and services you see value in.
2. Look at what you’re consuming
Another great place to find what companies to buy stock in is to look at what you’re consuming. I look at the apps I have downloaded and which ones I continue going to. This could be YouTube, Pinterest, Instagram, or even Amazon. I know we hop from app to app, but these are the brands that we’re consuming daily. What you want to do is figure out if these brands are on the stock market and under what name.
Let’s use YouTube as an example, it’s owned by Google, so you’ll search for Alphabet inc (GOOG). It is very common for big brands to have weird parent companies and even weirder stock tickers. So if you get a little confused, make sure you dump the brand name into a google search. This way you can feel confident that they’re on the stock market and what stock ticker they’re using. Again the point here is to become aware of what brands you’re consuming from and if you see enough value to invest in them.
3. Look at what you’re doing
A very important thing to do when trying to figure out which stocks to invest in is to see what you’re doing. I found myself always on Instagram searching for the latest items on Costco. This has been one of my biggest time passers during this pandemic. From the new margarita mixes to bulking up on toilet paper and other house items. Shopping at Costco and ordering my items online has been a time saver and safety priority. When looking at your daily activities, look at what the companies are doing that’s bringing you value. This is a prime example of a company I would buy stock in due to they’re great customer service.
For you, this can be where you shop for clothes, food, or even the technology that you’re using. Being cautious about what you’re doing and finding value in will be a great indicator of if you should invest in their stock.
ETFs for beginners
Now let’s say your still not sure which stocks to buy because of limited funds. Another option to help you buy into several stocks is to invest in Exchange Traded Funds (ETFs). This fund acts like a mini fruit salad, that holds small percentages of different fruits. Which in this case each type of fruit in the fruit salad will represent a percentage of stocks. Making it easier to invest in a specific industry like tech, consumer goods, or the S&P 500 in a cost-effective way. On top of that, they also provide more safety, just in case one of the stocks doesn’t perform well.
When it comes to investing it’s very important to know why you’re investing in the first place. I know how difficult it is when first starting to invest in the stock market and I want you “just make money”. Make sure the money you are investing isn’t money you need to pay your bills or pay off high-interest debt. Also, make sure you first have a stable emergency fund of at least 3-6 months of expenses before investing. It’s really important to make sure you have an investing strategy that reduces your risk and follows with your budget.
If you liked this article you will also like, What I Wish I Knew About Investing in My 20s.