Investing in stocks can be an excellent way to grow wealth, but for beginners, it can present as both an opportunity and a challenge. Jim Murray, a financial advisor with over 23 years of experience, breaks down the basics of investing and how to get started.
“When you invest in stocks, bonds, or mutual funds, you’re buying a stake in publicly traded companies,” Murray explains. “These businesses use the influx of capital to grow, and as they do, so does the value of your investment.” However, the financial markets are inherently volatile. “The most challenging aspect for investors is volatility,” he notes. “Some days the market will be up, other days it will be down. If you're not real comfortable with the fluctuations of the markets, then stocks are typically not a good investment for you. If you can stomach the volatility, it's a great place as a long-term investor to make excellent returns.”
Successful investing often depends on diversification. "You don't want all your eggs in one basket," Murray says. Owning a mix of stocks and bonds can help soften market volatility. Stocks can provide strong returns, while bonds offer more stability. Murray advises, “For instance, a $1,000 investment in a 5% bond yields a guaranteed return over its duration. So that can be a safer place to invest.”
For beginners, professional guidance is highly recommended. “If you lack investment expertise, consulting a financial professional can help you navigate the rough waters,” Murray states. “Day traders who go out and try and pick and make moves with their own stocks… that's a glorified form of gambling.”
Getting started in investing is surprisingly accessible. “You can begin with as little as $50 or $100,” Murray says. “If I'm taking on a new client, typically, we're going to sit down and learn a little bit about you to see where your risk tolerance falls in your time horizon. Every investor has a different threshold for market fluctuations. They may have short-term goals, or want long-term financial security.”
While stocks can historically deliver impressive returns, they are not suitable for short-term investing. For investments needed within a year, Murray recommends more conservative options like CDs or other guaranteed-return vehicles. However, for those planning five, ten, or even twenty years ahead - particularly for retirement - stocks can be an essential tool for building long-term wealth.
Jim Murray – Financial Advisors of Delaware Valley
https://tinyurl.com/JamesMurrayAIF