Let’s talk about how to invest in the S&P 500.
It’s fairly easy to buy and sell stock but it’s a lot tougher to make a decision on what you want to invest in once you decide to get involved. There are a wide variety of companies that you could buy into, and a lot of places to put your money. On the other hand, if you aren’t a large investor, you don’t want all of your hard earned money chewed up by a trader’s commission or other rates set to make the stock trading industry money. One of the most important parts of starting with the stock market or even the standard and poor 500 index is getting the right information, right from the start to make a powerful buying decision to help your money grow. Investing in the S&P 500 has historically provided great compounded returns.
Do I need a lot of money to invest?
There are a lot of options to start investing for beginners with little money.
How Do I Invest in a Company?
You can start to invest in stocks with little money. The process “seems” simple, buy a stock low and sell when it’s high. In theory it is that simple however in reality it’s more complicated. You will need to open up a brokerage account that will facilitate your trading activity. It is easy to walk into any old brokerage firm and just open up an account. However, for this reason, it’s essential to understand what the firm’s minimum deposits are, and how the transaction works. Sometimes, a brokerage agency won’t even accept your deposit unless you’ve got $1,000 or more. Also, commissions and fees can eat up your and without proper planning you can end up sinking all of your money into a broker’s pocket in stock fees, mutual fund fees, commissions, and trades- which is why the best options are sometimes places with free trades, like a scottrade free trade account. Even then, it’s essential to look into the various fees assessed per trade, per deposit, so on and so forth.
How Old Do You Have to Be to Buy Stock?
You can buy stock at any age- which can sometimes be a good investment, but unless you have a parent or guardian’s approval, you can’t actually trade, deposit, or buy stocks yourself until you’re 18.
What the heck is an investment index, anyways?
When people talk about “the market”, they’re actually talking about the investment index. This index decides exactly what our stock market is doing, and there are three major distributors of this information- the Dow Average, the S&P 500, and the Nasdaq, and they all define relative changes in the amount of money or stocks in any particular company’s portfolio, which then gives a portion of the market. It’s nearly impossible to keep track of each trading that occurs in the country, which is why we take a small to intermediate index- the Dow Jones only has 30 companies in its’ index, while the S&P 500 has, you guessed it- 500 companies. The prices are based on each security and the price of a stock in relation to the whole, and often provide diversification, which is historically a great way to invest in stocks.
All you have to do to invest in these companies is pick up a telephone and inform a brokerage firm that you want one of these types of stock. Sometimes, they’re referred to as an exchange traded fund, like a Standard & Poor’s Depository Receipt. These are both simply securities that denote how much money you’ve invested, giving you cost efficient stratification in the market and diversification without buying a large quantity of stock.
The S&P 500 is one of the absolute best benchmarks for those looking for large cap stocks and huge diversification, without putting all of their eggs in one basket. It covers 70% of the total market, and it’s one of the best indicators of market performance. If you’ve got money invested, and the market is heading up, you’re making money. As long as America is doing well, your money will be too. On the flip side of the coin, it’s a narrow industry- no foreign trading here, giving you your values, and most of the index is loaded into the top 45 companies, which comprises the top 50% of the market index- something that’s very important to consider.
Next, We’ll start delving into how you can start buying stocks with little money, and low minimum index funds: Figuring Out the Little Things
It’s very possible to open accounts and start trading with limited funds. The problem isn’t just selecting the proper investment or the best way to buy stocks, it’s more about being aware of all the restrictions and “punishments” that await young and inexperienced investors. Understanding your own individual restrictions is very important as a new investor, and doing your homework, and figuring out how to face your restrictions head on and find the perfect balance between minimum deposit requirements and compared commissions between brokers.
In general, for investors who are inexperienced or lack a great deal of money to pick and choose their various company or business investment ventures, S&P type of funds provide stable, reliable (as reliable as the stock market can be) and powerful, long term investments when you want to make a steady monetary profit. A “safe” bet for newbie investors or a long-term hedge fund for someone planning their retirement, S&P 500 is a great place to start.