What Is A Stock?
A stock is a piece of a company. If a company is worth $100 and you divide the entire company into 20 pieces. Then each pieces of that company would be worth $5. Meaning company’s stock is selling at $5 per piece. In financial world pieces are called Stocks or Shares. Once you buy a stock of a company, you are a fraction owner of that company.
How To Buy Stocks?
Stocks can be bought and sold through online brokerage firms such as Robinhood, Charles Schwab, Webull, Interactive Broker etc. Thanks to revolutionary Robinhood that started the $0 commission fee per trade, now most of the brokerage firms offer $0 fee trades. Meaning, you can buy and sell stocks as many times as you want without paying any broker commission fee. Before it used to be $7- $14 per trade.
Most of the brokerage firms have both online platform and mobile apps but Robinhood has the best user friendly mobile interface of them all. I personally use Robinhood and Charles Schwab. If you decide to open an account please use the referral links below-
Can You Buy Any Company?
You can only buy stocks of the companies that are publicly traded. For example- Microsoft, Apple, Nvidia, Meta, Google. These are some of the companies that anyone can buy through a brokerage firm. There are thousands of publicly traded companies in the US. The privately traded companies can not be bought through brokerage firms. For example: Cargill, IKEA, Bloomberg etc.
How Much Money Do You Need To Start?
There is no magic number to get started in investing. Most of the brokers offer fractional shares now a days, so you can start with as little as a few dollars. The harder thing to do is getting started. Investing is all about time in the market. The longer to stay invested the better your money will compound.
How to Find Great Businesses?
There are a few key metrics to look at when looking for a great business. The most important one is Profit. In other words, is the company making money? But just making money is not enough.
A company will be Great when it’s Revenue, Net Income and Cash Flow are increasing year over year for a long time. At least 5-10 years. At the same time growth rate of the increasing Revenue, Net Income and Cash Flow is growing as well.
After that Economic Moat is very important. Company should have a competitive advantage from other businesses even better if it’s a monopoly. That way other companies won’t be able to disrupt the business overnight.
Company should have low to manageable debt. Follow my Watchlist page for the lists of some of the great businesses in my opinion.
Follow Investment Knowledge page to learn more.