Understanding the market is difficult, but it is easy to start investing with some simple tips.
MINNEAPOLIS โ Understanding the stock market is difficult. All the moving parts, the different markets, the ups and downs... it's a lot.
The stock market has been in the news lately for record profits in the market. In the week of February 9, the S&P 500 rose 0.6% and ended a day above the 5,000 level for the first time. The Nasdaq composite also jumped 1.2% to move within 0.4% of an all-time high, which was set in 2021. The Dow Jones Industrial Average lagged a day after setting its latest record. It fell 54 points, or 0.1%.
Optimism on Wall Street is also high and it could be a good time to dive into the market. Fortunately, if you keep a few tips in mind, you too can start investing.
Here are the basics when choosing the right stocks for your portfolio:
1. Find a publicly traded company
There are thousands of companies to choose from. You can find a list and more information about the US Securities and Exchange Commission (SEC) website.
2. Find out how this company makes money.
What does the company manufacture or sell? When you buy shares, you become a part owner, so you want to make sure you know what kind of products and services your money supports.
3. Take a look at their annual report
Every publicly traded company whose shares are traded on a stock exchange must file regular financial statements and disclosures with regulators such as the SEC. This report will have more information about financials, balance sheets, cash flows and income statements. The company will have this information available online; Look for the "Investor Relations" section of the site.
4. Research the company's prospects and plans for the future.
You can find good information about a company in its annual report, but to take it a step further, consult trade journals and online resources. Try to find information about the company's strengths and weaknesses, the quality of its management, and its growth projections.
5. Decide if you want to own this company.
Once you've found a stock you're interested in, it's time to open a brokerage account and buy its shares. There are several options for different styles of traders. Some online brokers also offer educational resources. This NerdWallet resource recommends these 11 brokers, including Fidelity, Webull, and JP Morgan.
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