Who can invest in the stock market?
An amazing question to kick off today’s chat. According to Menlo College’s “International Student Page,” our family of Oaks is comprised of nearly 25% of students from across 35 countries. Therefore, you or your peers may hesitate to read further past this point but wait! A non-US citizen can legally trade US stocks under an international stockbroker (1). If you are an international student, I will dedicate a future article about the ins and outs of investing, so we both can learn about the requirements foreign investors must follow.
On the other hand, if you are 18 or above with social security number and change lying around, you are ready to invest! Before we continue, I would like you to recognize your privilege as a US citizen, so you can decide to be an ally for students who must hurdle over several barriers before reaching your first step.
What do I invest in?
There are four different investment “personalities” you can add to your portfolio.
The independent boss- Individual Stocks: Those who invest in individual stocks are either day traders, an investor who frequently buys and sells stocks, or rookies to the stock market, like me four months ago. Tesla (TSLA), Zoom (ZM), and Amazon (AMZN), and thousand more individual stocks are public companies that allow people like you and me to own a portion of their company, and, in some cases, you have the power to elect board members.
Remember, the stock market tracks emotions, so investors of individual stocks are gambling against market volatility. For instance, after the World Health Organization (WHO) identified COVID-19 a pandemic (2), the Dow Jones (DJI) sunk 22% into the deep blue sea of stocks.
The genie- Mutual Funds: If your portfolio is comprised of mutual funds, you have met or spoken to a professional money manager who serves your needs. Unfortunately, mutual funds are maintained and polished by your manager who tailors your investment portfolio according to your desires. For instance, if you wish to have a high risk-tolerant account until you turn 30, your manager (or genie) will grant your wish with a portfolio that reflects your needs and future plans.
The matchmaker- Index Funds: A fund with stocks, bonds, or other securities seeks to match, not beat, the outcome of a sector in the market. Let’s put this into perspective. If you are crushing on the technology sector, then you decide to invest in Vanguard’s Technology Index Fund (VGT), the matchmaker who joins top technology giants in one thriving relationship. Index funds (or matchmakers) thrives off of the performance of a certain sector of the market.
“Time in the market beats timing the market”
Thank you for reading this load of content. Trust me, future articles will be short and concise but the purpose of this piece is to expose you and my peers to the multitude of factors investors must consider before investing. You are incredible, talk to you in my next money chat.