In this day and age, people are always looking for a way to add more to their incomes. Whether it be taking up an extra job or selling some of your items online, there are many options that could be taken. One of the options where people are least informed is in the business of investing.
“When you talk stocks with people they tend to cringe or have little to no knowledge on the topic,” H&R Block tax associate Cole Reiss said. “It’s an opportunity to save money and allow it to grow faster five days out of the week than a savings account.”
Now I’ll be honest. Before I became aware of the of the logistics and the workings behind how and what to invest in I was extremely skeptical about the whole idea. Would I lose all my money? How do I make money? Why do they need my Social Security information?
The whole idea of just putting your money and essentially faith in a company was baffling, but it was an opportunity to learn. So why not read up on some things.
Dividend/yield and PE ratio are extremely important terminology. Knowing these terms can alleviate the feeling of , “What’s going on?”. Now the dividend/ yield is the percentage of the current share price. According to investopedia.com, the dividend/yield is the financial formula that companies would use to pay out to the investors, this is essentially the money making aspect of it.
However you must remember these three things when viewing the div/yield of the companies you wish to invest in:
- Not every company has a div/yield.
- Companies have two options when the div/yield are available:
Pay out the percentages owed to the investors.
Re-invest into the company itself.
- The higher the percent the better.
“When it comes to actually making money in the stocks, the div/yield is by far the most important of this process,” Riess said.
“You have to make sure that you have a pretty good understanding of what company does with its money, payout or re-invest.”
The PE ratio is a little different and takes a little more to understand it. This ratio is used to value the company, which is how the value of the stocks are configured. Just as with div/yield, you have to remember these three things with PE ratio:
- Companies with high growth will have higher PE ratios.
- Companies with a higher risk to fail will have lower PE ratios.
- Companies with low reinvestments needs will have high PE ratios.
Investing in companies such as Nike and the WWE are great starter stocks that are notoriously known. These companies have been successful through; profit-margins, having roots and ties with the sports world, immense advertising, etc.
“Don’t allow momentary success fool you, Under Amour had great success in 2015 but ever since then their share prices has continued to go down,” Riess said.
“Clothing companies do the best in advertising because companies like a Nike and Under Armour get advertisement through people wearing their products and posting them to their own social media accounts. But don’t be fooled things like these have no astronomical effect on the stock; these things are very seasonal.”
Sometimes the best things to invest in are things you cannot see yourself living without: people brush their teeth, people are usually on their phone or laptop, binge watching television shows. These are all things that are common and what most people that you may speak with do.
If you follow these steps, you yourself could begin investing in no time:
- Invest in what you know and use daily.
- Keep everything you buy.
- The more diverse your portfolio is the better.
- When the market is down, that’s when you can most the most money. Take advantage of bad days and weeks in the market.
- If you have no faith in the company do not buy any shares, you should feel confident about where the money is going to.
- Listen and learn. If you have friends or family that have greater experience and knowledge learn from them and ask as many questions as possible.
- Use your youth to your advantage. The early you start the better, but younger people drive the market they decide what becomes big and what doesn’t.
- Don’t be scared.