How to Buy Stocks

The Basics

Do investment terms like “capital gains,” “venture capital” or “inverse yield curve” intimidate you? If so, you’re not alone. The sophisticated jargon of the investment trade has convinced many people that investing is too difficult to understand, deterring them from buying stocks. However, investing only seems complex because it involves many esoteric words; the underlying concepts and processes are actually very easy to grasp. Once you build your investing vocabulary and educate yourself about how the stock market works, you will realize that it holds very little mystery.

The stock market has always increased over long periods of time, “a trend that isn’t likely to be reversed.” Thus, when you buy for the long haul, instead of dipping in and out of the market quickly, you are likelier to make a sound investment. You can buy stocks and bonds directly, or you can invest in them indirectly – for example, through mutual funds. Stocks, bonds and mutual funds are all examples of “securities,” or “certificates that represent your participation in an investment activity.” Your involvement is “negotiable,” so you can sell your interest, or increase it by purchasing...