If you play your cards right and work hard, there will come a time when you have enough savings that you can finally start to think about investing. It can be an exciting and scary time, especially if you haven't done your research before hand to figure out exactly what you want to do with your savings. Investing in stocks is the most popular form of investing and it opens up a whole bunch of different options that you can play with. Let's take a look at some generalities about stocks and then we'll get more specific.
Before you rush out to meet with your new stock broker, it is important to understand a few things about stocks. First off, all stock purchases carry a degree of risk to them. There is always the chance that the company you invest in will experience a drop in stock price after you buy their stock, just like there is a chance that the stock price will rise and you will have the chance to turn a profit. No matter what you are told by others or what you are lead to believe, there is no such thing as a stock purchase without risk. Some companies tend to offer more risk, and a higher return, than others, while some companies tend to offer a lower amount of risk and either a predictable amount of profit or a small amount of profit. The most stable stocks available are known as blue chip stocks.
Pinning a direct definition on what is a blue chip stock is difficult since the definition is always changing, but generally, a blue chip stock is one that has a long and storied history of turning a profit year after year and is from a company that is extremely unlikely to go out of business any time soon. Companies like Microsoft and Shell Oil are considered blue chip stocks. Some companies were once blue chip stocks and have now lost that tag, such as General Motors and Delta Airlines, so just because a company was once a stable, reliable investment doesn't mean that it always will be. Investing in blue chip stocks is considered the safest of all stock investments, but even blue chips have risk, they just tend to have less risk than investing in less established companies in fields that tend to be less reliable, like technology.
If you are looking to buy stocks for the very first time, you essentially have three main options available to you. First, you can buy stock directly from the company that issues it. Sometimes these direct stock buys are limited to employees and family members of that particular company, but once in a while, a company like Microsoft or another large corporation will offer a direct stock buy. This can be a worthwhile thing to do since it tends to keep any overhead or commission fee out of the picture.
You can also buy stocks in a more traditional way - through a full service stock broker. A broker will make a small fee every time you trade stocks, however, they can also offer advice on what you are doing and let you know if you are making the right choice as it relates to your long term investment plans.
Finally, you can use online stock trading websites to trade stocks, as well. These sites charge a commission just like a regular stock broker, but it is often quite a bit less than what a broker charges. This choice is only sensible if you are an experienced stock trading professional.
