Large-Cap Stocks

Investing in large companies is the best way to get started in the stock market. By buying stock in large, well-known companies, you can get a feel for the stock market without taking on too much risk.

When you buy stock in a company, you are buying a piece of ownership in the company. When business is good, people are willing to pay more for a piece of the company, so the value of your shares will go up. Likewise, when business is bad, the price will go down, and you will lose value. But that is just one way to make money from stocks.

Another possible source of income is from dividends. When a company has more money than they know what to do with, they will frequently give it to the shareholders as a dividend. If you own 1% of the company, you get 1% of that money. The more shares you hold, the higher the dividend you will get.

Life is not all good on the stock market though. If business gets tough, you can lose money on stocks. And if the business goes completely bankrupt, you could lose your entire investment. For this reason, you should always have an emergency fund before investing in stocks, and even then, only invest what you can afford to lose.

Pros of large-cap stocks.  Historically, stocks have done much better over the long run than bonds and CDs. This does not necessarily mean it will continue in the future, but investing in large, well-known companies is usually considered a safe investment.

In addition to the growth of the stock value, you can also collect money from dividends. In fact, for many stocks, the dividends alone can return more than a CD or savings account.

Cons of large-cap stocks. You can lose money. While stocks in general have historically done better than bonds, any individual company can still fail. Don’t forget the most recent stock market crash of a few years ago, when even large companies went down. Just because a company is big, that does not mean it can’t fail. And even if it doesn’t fail completely, the value of your shares can still decrease.

Remember, only invest money you can afford to lose, and only invest after you have an emergency fund in your savings account.

Picking stocks can be the subject of an entire book in itself. But the actual process of paying for a stock is pretty simple. You will need to sign up for an account with an online broker and deposit money into your account. From there, it is just a matter of picking the one you want and paying for it.

It is highly recommended that you find some good books on stock selection before actually buying any. You want to find a good, stable company that will be around for a long time.

You will lose money sometimes on stocks, especially when you are just beginning. The trick with stocks is to keep learning more about them, and always learn something from your bad picks. As you learn more, you will begin building wealth.