Stock market learnings

I have only started investing into the stock market several months ago in December and have been using the Robinhood App, which has been phenomenal.  I have invested in FCAU, AMAT, VSLR, BAC, and F.  F, AMAT, and BAC have already paid me dividends, which I rolled back into my stock portfolio.  In the past couple of months, I have paid close attention to the market and paid close attention to different industries.  For example, I will pay attention to the auto industry because I have shares in Ford Chrysler Automobiles and Ford.  After getting to know the industry more and the manufacturers in each industry, you can start to see how current events impact shares.  With possible tariff increases on aluminum, we may see a drop in Ford stocks because they use aluminum framing in their trucks.

A lot of people think they are going to get into day trading and make a fortune.  This may be true for some, but not for all.  There are some people that lose a substantial amount of money and end up bankrupt.  If we take a look at how we are taxed for stock trading, we can get a better look at the whole picture.

  • 5% tax if you are in 15% or lower tax bracket (must hold shares for 1 year)
  • 15% tax if you are in 25% or higher tax bracket (must hold shares for 1 year)
  • Normal tax rate must be paid if you hold your shares for less than 1 year

The other challenge with day trading is that you need to have at least $25,000 in a margin account.  Although there is a high reward associated with day trading, there is also potential risk.  Even though day trading works out great for some, I am not willing to take these high risks in an activity I am not too familiar with.

What I have learned in the past couple of months is, buy safe stocks that pay out dividends.  Once you receive those dividends, roll them back into your stocks to help your portfolio grow.  This would be the slow, but safer way of growing your money.  If you select good stocks, then you could get a 7% to 10% return on your investment year over year.  I know this is not always the most exciting way of doing it, but the excitement will arrive after when you realize how much your investments have grown.  If you read about some of the greatest investors, then you will find that they did not take unnecessary risks.

Lastly, only invest money that you do not need anytime soon.  Once you put your money into an investment, prepare to let it sit for an extended period of time.  This will help you mentally as you endure drops in the stock market because it will most likely happen throughout your duration of owning stocks.  Sit patient and let the stock rise back up.  During all these activities are happening, you should still be getting dividends, which will help your investments grow.

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