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Stocks 101 | Money Smart

You don’t need deep pockets to invest in stocks. Whether you’re merely curious or ready to jump in, here are the basics you need to know.

SAN ANTONIO — You don’t need deep pockets to invest in stocks. Whether you’re curious about it or ready to jump in, here are the basics you need to know.

WHY STOCKS?

“If you look at different types of asset classes from real estate to bonds to cash to gold, stocks have been the best performing asset class over the last 100 years,” said Karl Eggerss, senior wealth advisor and partner of Covenant. “But it doesn’t come for free. There’s volatility that people have to put up with to get those good returns over the long term.”

WHAT IS A STOCK? 

“Stock is simply an ownership of a company. There’s private and public. A private would be something that a handful of people own. Maybe there’s only one owner and nobody else can invest in it a particular time. Public stock is when the company needs to raise more money,” explained Eggerss. “They either need to borrow it like you or I would, or they can go out and raise money by selling some of their ownership to the public.”

Credit: KENS 5

BUYING SHARES

“You are not buying them from the company. You are buying from another investor who is selling to you and you guys are agreeing on a particular price,” he said.

HOW DO I MAKE MONEY?

“Either by holding it. More people are going to continue buying that stock over time and it pushes the price up. Simply supply and demand. Or the company may pay a dividend,” said Eggerss.  

He added that before you invest in the stock market ask yourself: When will I need that money? Eggerss said if you need the money soon, put your cash away in a rainy day fund or emergency fund. 

However, if you have more time and can leave your money in stocks for years, you can afford to take more risks and invest in more stocks.