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Stock Market for Beginners 2022


Everything a beginner investor needs to start investing in 2022

If you’re not quite sure how to start investing or better yet, if you just don’t want to get started and lose all your money, this video is going to get you where you need to be.

I’m answering every question I get from new investors from what are stocks to a complete plan to get started. It’s a complete stock market for beginners tutorial and we’re starting now!

Stock Market for Beginners 2022

Frequently Asked Questions for Beginner Investors

Nation, I’ve started a playlist on the channel for videos answering your most common questions about investing but I wanted to make one video you can use to get started investing.

So I’m making this like a one-stop FAQ section for all your 2022 beginning investing questions. We’ll cover everything from what are stocks to some great stock-picking strategies and how to invest any amount of money.

Now I wanted to make this video as inclusive as possible, covering as many of those questions I see every day in the comments to other videos. That meant adding questions you might already know the answer to but are still asked by a lot of others in the community.

I want to get started but I also need your feedback. I dug deep into the comments on all 800+ videos on the channel for these investing questions but I’m sure there’s a few out there I missed. So in the comments below the video, let me know which questions I need to answer in the next video. What are your questions about investing or what are the most common you hear from beginning investors?

What are Beginner Stocks for 2022?

The first thing you need to know to start investing in stocks is…well, what are stocks?

When a company goes to raise money it can either borrow through bonds or sell a part of the company by issuing shares of stock. Say a company is valued at $1 billion and it issues a hundred million shares of stock, that means each of those hundred million shares is worth $10 and represents a hundred-millionth ownership of the company.

So if you buy 100 shares for $1,000 then you actually own 0.0006% of the company. Now for most of us, we might be an owner of the company through those shares of stock but we own such a small percent that we don’t get much of a vote or a say in how the company is run. For larger institutional investors and hedge funds though, they might own millions of shares and actually have a pretty big vote.

Once a company issues shares of stock, those shares trade between buyers and sellers on the stock exchanges. Some of these exchanges like the New York Stock Exchange are still a physical place but mostly it’s all done by computer now like the Nasdaq which is an all-digital exchange. Investors exchange their shares of ownership, buying and selling to the tune of hundreds of millions of shares a day.

How Do Beginner Investors Make Money in Stocks?

With that idea of stocks, the next logical question is just how do you make money?

So if stockholders own the company, what does that mean? Well, you get a percentage of any money the company decides to pay out as dividends and technically you also have a share ownership in any future profits.

Now companies can technically live forever even if some go bankrupt and some get bought out so the real way investors make money besides those dividends you collect is by selling your shares for more than the price you paid.

OK, so the idea of buying low and selling high is sometimes easier said than done but there are some easy ways to make sure you make money on your stocks.

First is to make dividend stocks a part of your investing strategy. This graph shows the percentage of stock returns from dividends for each decade since the 40’s and the average. You can see that dividends collected by investors have accounted for between 16% to 73% of the total return in any give decade and just over 40% for the nearly 90-years.

Average Stock Market Returns

Now that’s not saying stocks that don’t pay a dividend can’t produce strong returns but even when stock prices fall, those dividends you collect are always, 100% of the time, going to be a positive return.

It’s cash in your pocket and that’s tough to beat.

What Does Buy-and-Hold Investing Mean for Beginners?

The other way to make sure you make money in stocks is to hold them for the longer-term. This is a very complicated, professional strategy called buy-and-hold that says buy your stocks and don’t sell them. OK, not so complicated but really the best strategy for most investors. This graph shows the earnings per share for companies in the S&P 500, the largest companies in the U.S. and representing the stock market, and while there are many years where those earnings fall, so in all those shaded areas where a recession happened, the general trend is pretty strongly higher.

S&P 500 Earnings per Share History

So even if those earnings and the stock prices, because remember, stocks are an ownership of those earnings, even if they fell occasionally in the short-term, they eventually went much higher over years and years.

So invest in dividend stocks and hold your stocks for years. Pretty simple really.

Where Do Beginners Buy Stocks?

Ok, so we know how stocks make money now where do you buy stocks?

Buying stocks is usually done through a broker that has special access to the stock exchanges where stocks are traded. These brokers work with investing websites like TD Ameritrade and Robinhood and a lot of times the platforms will have their own broker.

I feel like the answer to this question though is one of the most misunderstood by new investors. They hear about an investing site, open an account and assume that all these platforms are created equal.

In reality, there are different investing sites for different types of investors. Platforms like M1 Finance, which we used for our 2019 Challenge Portfolio, are more for long-term investors and people that want an easy way to automate their investing. M1 has a feature that automatically invests any deposits or dividends across all your stocks so it makes it super-easy to manage.

Then there’s a site like Webull, another platform I use, that is much more set up for stock market trading. Here you get features like a stock simulator to test strategies before you invest, you get access to stock research and can see which companies will issue shares soon. Webull is much better suited for investors that want to analyze stocks and be involved in their investments on a weekly basis.

But not only are there different investing sites suited best for different investors, there’s nothing that says you can’t have an account on multiple sites and this is really the other big mistake I see with new investors. They think you have to do all your investing on one site and really miss out on a lot of features and freebies.

In fact, I have accounts on seven different investing sites. I get all the research and features I need for different types of investing and I get lots of bonus cash and free stock which I’ll talk more about next.

How Do You Buy Stocks Online in 2022?

Now we know where to buy stocks but how do you actually buy a stock on one of these sites?

I’ll walk you through the process of buying stocks on the Webull app but it’s really the same on any investing platform you choose. With Webull, you get a lot of features you won’t find on the other commission-free apps like being able to see which companies will soon issue stocks in the IPO center and which are reporting earnings coming up. To find a stock, you can either search for it by name or the ticker symbol, so we’ll go to Microsoft here and you can click on buy or sell here at the bottom.

Once you’re on this screen, you choose your order type which is either going to be a market order or a limit order. Market orders mean you buy or sell at the first available price in the market, so an immediate transaction. If you put in a limit order, you also put in a price for the shares you want to pay and the platform will hold your order until that price comes along.

So a limit order doesn’t guarantee you will buy or sell the stock. If the price of the shares never gets to your limit price then nothing will happen. I usually only use limit orders to buy options on stocks because the price between buyers and sellers can be far apart. For buying or selling stocks, you can almost always use just a simple market order and get the best available price.

So you’ve got your market order to buy the shares then you need to put in the quantity or number of shares you want to buy. This just depends on how much you want to invest and the stock price.

So if shares of Microsoft are trading for $159.30 each and I have about $80,000 to invest then $80,000 divided by $159.30 means I could buy up to 502 shares. I’ll round it down and put in 500 here and click trade.

This is going to be the way you buy or sell on most platforms. Others like M1 Finance let you buy fractional shares, or pieces of shares, so you’ll just put in how much you want to invest and not the number of shares. Either way, these sites make it super-easy to buy and sell stocks so that should never be a problem.

To get you started, I’ve got a free step-by-step checklist you can download that’s going to show you exactly how to open an investing account and buy your first stock in less than five minutes, and as a bonus you’ll get a free share of stock worth up to $1,000 just for opening the account.

Beginner Stock Picking 2022

Now let’s look at a couple of stock strategies, ways to pick stocks.

There are lots of ways to pick stocks, strategies you can follow and different analysis you can do. I’ll show you two of the most popular strategies here but this shouldn’t be confused with your portfolio strategy which is actually going to be much more important than the stocks you pick.

Think of your stock investing strategy as the what of investing, what stocks you put in your portfolio. Your portfolio strategy though is more like the HOW of investing, how you put together the portfolio and the assets in it.

So your portfolio strategy is going to answer questions like how much you have in stocks, bonds and real estate. It’s going to be how much you have in exchange traded funds, ETFs, or in individual stocks. The reason this is so much more important than the stocks you buy is because most of your returns and the risk comes from that split you use in stocks, bonds and real estate and how you make up your portfolio which we’ll get to next.

But for stock investing strategies, I just wanted to show you two popular ideas here; value investing and growth investing.

First we’ve got my favorite is value stocks and they’re called that because you’re looking for stocks with a price that is lower compared to some other measure like their earnings or sales.

Value investing just makes intuitive sense, right? You’re paying less for those earnings, getting a better deal than growth investing which we’ll look at next.

Finding value stocks means looking for stocks with a low price-to-sales or price-to-earnings ratio which you can use any stock screener to do this. Now you don’t want to invest in just any cheap stock though, you want to look for stocks that are not only cheap but also have good sales growth. You want to look for an operating margin that is higher than competitors and not too much debt.

An important point I want to make though and this is something everyone in the Bow-Tie Nation has heard me say before, but when you’re comparing stocks, you absolutely have to compare stocks with similar companies in the same sector or industry.

For example, if you compared financial ratios like the price-to-earnings or sales growth for Apple against those of Bank of America it would tell you absolutely nothing. Apple is in that faster-growing tech space while Bank of America is a financial company. A good PE ratio or a safe debt-to-equity ratio in a bank stock is going to be totally different than that of a tech stock.

So just remember, if you’re comparing two stocks, trying to decide which to buy, they need to be in the same sector if you’re going to compare them head-to-head to pick the best company. If you want to decide between two stocks to buy that are in different sectors, you should compare each stock against average ratios in its own sector then decide which is best on that comparison.

Growth investing is something like the opposite of that value strategy. With growth investing, you’re looking for the fastest growing companies regardless of price.

The idea here is that since stocks are an ownership of those future earnings, you want to pick companies that are growing those profits faster than others. Now the catch is that these companies usually have much higher price-to-earnings or other ratios because investors are willing to pay a higher price if the earnings are growing faster.

When I’m looking for growth stocks, I’m looking for stocks with earnings and sales growth at the top of the industry and preferably companies that are increasing that rate of growth. I’m also looking for better profitability in the operating margin and a reason the company can continue to grow, so maybe a catalyst for that growth.

So two strategies you can follow to pick stocks, really two ways of looking at the market.

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What are ETFs?

Next I want to cover one of the best opportunities in investing, something called an exchange traded fund or ETF for short.

Investment companies like Vanguard or Blackrock hire teams to create funds around a theme or an index. So they’re pulling together a group of stocks into a fund, they’ll buy dozens or even thousands of stocks or bonds in that theme and then issue shares of the overall group.

This is a really easy way to invest because you can get lots of different companies within a theme, like tech stocks or dividend stocks or value stocks, all by just buying shares in this one ETF instead of individually buying each company. The fund charges a percentage fee of the fund assets each year to pay the management team but for a lot of ETFs, this is less than half a percent.

Now ETFs are important first because they give you instant diversification in that group. So you’re not worried whether your shares of Procter & Gamble are going to tank because it’s just a small part of your fund that holds it along with Johnson & Johnson, Coca Cola and Walmart.

ETFs are also a great way to invest though because they give you a stress-free investing strategy. You can invest in this broad theme or group of stocks without worrying about picking the best stock or spending hours a week doing stock market analysis.

Where to Learn about Stocks for Beginners

So I know this video isn’t going to answer every question ever and you’re going to need more information from time-to-time, so where do you learn about stocks?

Well…I hope you join our Bow-Tie Nation and become a part of the community here on Let’s Talk Money. We’ve got three videos a week and hundreds already done on beating debt, making more money and making your money work for you.

But there are also a lot of other great channels right here on YouTube for investing. A few I follow include Ryan Scribner, he’s got some great videos on making money and general investing. Wealth Hacker Jeff Rose does more of the making money videos but also how to invest your money. And Bob over at SeedTime Money will give you a great perspective on Faith and Finances.

Maybe just as important as where you go to learn about stocks is the places to avoid. These would be the websites and channels that just look spammy, that try to over-promote a specific investment or strategy like penny stocks, forex and bitcoin. We’re talking those high-risk, high-return investments that just seem to draw investors into all kinds of scams and false promises.

How Much Should I Invest in 2022?

Probably the most frequent question I get on the channel is how much money do I need to invest to make a certain amount like $1000 dollars a month?

People hate the answer I give them here but I don’t want you to think you can start investing and overnight be collecting a thousand dollars a month. It’s those kinds of stock myths that are just going to have you chasing returns and losing your money.

Remember how you make money in stocks, from dividends and selling your shares. Now you don’t want your portfolio value to decrease unless you’re winding it down in retirement so basically the question becomes, what percentage can you earn each year and withdraw so you’re not touching the principal.

A good rule of thumb from advisors has always been about 4%, you can take out 4% of your portfolio value each year and not have to worry about running out of money for 30 or 40 years. So if you’re trying to get to a thousand a month or twelve grand a year then $12,000 divided by 0.04 means you’ll need a portfolio of $300,000 which actually isn’t too bad but then again twelve grand isn’t enough to live on either.

Even if you take out 8% of your portfolio each year, which would be a stretch to do long-term and not run out of money, you’d still need a portfolio of $150,000 to collect that grand a month.

Or more realistically here, if you wanted to retire on $36,000 a year plus whatever you can collect on social security, and you plan on withdrawing that safe 4% of your portfolio each year, you’ll need $900,000 in investments to do it.

That might seem like a lot of money but it’s doable, especially over 20 or 30 years of investing even if it’s not the quick answer most people want to hear. It’s why I also cover ways to make more money on the channel, so you can make more money on the side and not have to wait that 20 or 30 years for your financial future.

How to Invest Small Amounts of Money

So by now, you’re ready to invest but maybe you don’t have a lot of money to get started. How much do you need to get started and how can you invest with small amounts of money?

I get this question all the time and the answer probably isn’t what you might think. How much you start with actually means very little. You can open an investing account on most websites with nothing at all and you’ll get that free share on Webull when you deposit just $100.

Much more important is that you invest regularly. This graph shows the portfolio value over 30 years; the blue line is investing $5,000 once versus the red line which is an easy $50 investment each month.

How Much Do I Need to Start Investing?

And the result is really amazing here, by putting away just $50 a month, it grows to over $74,000 in three decades, well over the amount you’d have by investing that one-time $5,000 into an account.

Now if you’re going to be investing these small amounts, you need to be on a commission-free site like Webull or M1 Finance so you’re not losing your money to fees. What I like about M1 is that you can pick all your investments, then the site is going to automatically invest any deposits or dividends across your entire portfolio.

So whether you’re investing $10 or $10,000; the idea is still the same. Put together a diversified portfolio of stocks, bonds and real estate with some funds and individual stocks and watch it grow over time.

2022 Investing Plan for Beginners

Now we’ve answered a lot of those stock market beginner questions but I know it can be difficult putting all this together for a plan to get started. So I want to kind of fill in the gaps here and give you that plan for reaching your financial goals.

First is going to be to save up that first $100 to open an account. That’s going to be the amount that gets you a free share on Webull or you can go with another platform but I want you to commit to saving at least that $50 a month.

Set this monthly investing amount at whatever you can afford comfortably and not have to skimp or worry about needing the money. That’s one of the biggest mistakes I see new investors make, they try saving too much and don’t budget for emergencies. Then when a financial emergency does come up, they have to take money out of investments and that just crushes their motivation to invest.

Pick five to ten ETFs as that core part of your portfolio, so you’re going to invest around 65% of your money in these funds that will give you broad exposure to stocks, bonds and real estate stocks. Then you can take the rest of your money and invest it in maybe 10 to 15 individual stocks but no more. I don’t want you building a portfolio of 30-plus individual stocks because you just don’t have the time to follow them all. Plan on ten stocks that you really love and can follow.

For example; if you invest $100 then you’d hold $65 of that in your list of funds. Of that money, maybe you’d have $40 in stock funds, $20 in bond funds and another $20 in real estate funds. Then you can invest the other $35 of your portfolio in that list of 10 individual stocks you really like.

And remember, on a platform like M1 Finance, you can set all this up with the percentage of your money you want in each of these stocks and funds, then the website is going to automatically invest your deposits across the group.

That’s it. Investing can be so simple if you stick to these basics. Just keep saving regularly and investing your money to watch it grow and create that financial future.

Read the Entire Stock Market for Beginners 2022 Series

How to Start Investing with No MoneyHow to Win the Stock Market Game [4 Rules]How Many Shares of Stock to Make $1000 a Month?

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