Important Information Before Acquiring Your First Stock
A 2023 study from Gallup determined that around 61 percent of Americans over 18 owned stock. Gallup upped this estimate to 62 percent in 2024, or about 162 million people, the largest number of American stockholders since 2008. Individuals interested in acquiring stocks can benefit from a few important tips.
The prevalence of Americans who own stock has grown by eight percent over the last decade. The distribution of stock investments among Americans is hardly equitable: the top percent hold 50 percent of all stocks, with a combined value of $23 trillion, while the bottom half of stock owners control just $480 billion.
First-time investors must understand the definition of a stock. An individual stock offered by a company represents a single stake in that company. A person may acquire a few stocks or acquire hundreds of thousands of shares. If a person buys stock in a company at a low price, potentially because the company is struggling or just starting, they can wait until business improves. The stocks increase in value, later selling the stocks for a profit.
Of course, investors risk acquiring stock in a company that eventually fails, rendering the stock worthless. Knowing when to hold onto a stock and when to sell, even at a loss, is an important skill all investors must develop. Investors may have the opportunity to acquire stock directly from a company, but most buy them through a major brokerage.
There are many different types of stock investment strategies. Day traders acquire and sell stock frequently, taking advantage of minor or temporary shifts in value. Others benefit from a large ownership stake in a company, allowing them to better dictate the company's direction and may hold onto their investment portfolio for decades.
Stocks offer first-time investors several advantages and potential drawbacks. They often grow alongside the greater economy, and stocks tend to accrue value if the economy is thriving. However, the opposite is also true: many stocks can rapidly decrease in value during economic downturns.
Technology has made investing in stocks easier than ever. Online brokerage platforms allow Americans to purchase and sell stocks with the click of a button. The barrier to becoming a stock investor is generally low, making it a great option for inexperienced investors. People can invest a small amount of capital and track their stocks as they rise and fall. Once investors have a better idea of how investments work, they can form more concentrated strategies.
Additional benefits range from the liquidity of stocks to their inflation-resistant nature. That said, stocks can be volatile. Even in a strong economy, any number of external or internal factors can cause a company to drop in value suddenly. Inexperienced investors must research the various tax implications of investing in stocks. For instance, the IRS makes certain gains from stock investments subject to capital gains taxes. Lastly, while the barrier to entry is low, novice investors should not expect easy profits. Understanding market trends, fluctuations, and other important factors that influence national and global markets takes considerable time and effort.
Diversification is a great way to minimize risk, decreasing an investor's reliance on a single industry. Independent investors should attend classes and conduct comprehensive research before making major investments, while Americans outside the financial industry should strongly consider working with a knowledgeable investment professional.
Securities and advisory services offered through Centaurus Financial, Inc. Member of FINRA and SIPC . A Registered Investment Advisor. Supervisory office: 540 Fort Evans Rd. NE, Suite 200, Leesburg, VA 20176, 714-456-1790 x304. Pioneer Financial Group and Centaurus Financial, Inc. are not affiliated. This is not an offer to sell securities, which may be done after proper delivery of a prospectus and client suitability has been reviewed and determined. Information relating to securities is intended for use by individuals residing in Arizona, California, Florida, and Wisconsin.
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