The benefits of investing in the stock market

The stock market allows you to use your own dollars to buy a tiny bit of ownership in individual companies. By purchasing shares, you are buying stock in a company. Most of the companies out there have the intention of GROWING. You can utilize your own money to help companies grow by buying their stocks set at a specific price. Think of it this way... they are letting you purchase at a set price, you are betting that the price is going to increase over time as they sell products and services, and then you can cash out.

A basic explanation of the stock market and indexes

The stock market is a marketplace where publicly traded companies' shares are bought and sold. When you buy a share of a company's stock, you become a part-owner of that company, and your return on investment will depend on the performance of the company. If the company does well, the value of its stock will increase, and you can sell your shares for a profit. If the company does poorly, the value of its stock will decrease, and you may lose money.

The stock market can be divided into different markets such as the New York Stock Exchange (NYSE) and the NASDAQ. These markets are where stocks of publicly traded companies are bought and sold. The prices of the stocks fluctuate based on supply and demand, the company's financial performance, and other factors such as economic conditions, and news.

Investors use stock market indices, such as the S&P 500, to track the performance of the overall market. The S&P 500 is a stock market index that includes 500 of the largest publicly traded companies in the U.S. and it's considered to be a broad indicator of the U.S. stock market.

It's important to note that investing in the stock market is considered to be a risky investment and the returns can fluctuate depending on the performance of the stock, market conditions and other factors. It's recommended to have a long-term investment horizon and to diversify your investments by investing in different sectors and markets.

Here are some reasons why the stock market is a good place to invest:

1. Keeps your money relatively liquid: The stock market is a good place to invest because it keeps your cash relatively liquid. If you need to cash out of a stock to use the money for something else, like purchasing a home, you can do so pretty easily.
   
   
2. The stock market allows you to invest in a variety of companies easily: with the ease of the internet, you can buy stock in a company very quickly. With the right research and execution, it can be a great way to leverage your own money.

Why I recommend you start with Index Funds in your portfolio...

In this course, I'm going to recommend that you start by investing in Index funds (a basket of stocks) and then broaden your knowledge so you can learn to trade individual stocks. The learning curve is much bigger for trading, but the biggest benefit to picking stocks is you can do it with intention. meaning you get to pick companies you like or believe in.

Index funds act as a "basket" or collection of stocks, so you don't have to worry about taking time to research a bunch of individual stocks. You can invest in just one Index Fund and you will be represented in MANY different stocks all at once.

Because index funds are a collection of stocks, this means there is more “cushion” if one stock goes down inside the entire fund. The greatest benefit to index fund investing is that you are automatically diversified, meaning you won’t be as impacted as if you were "all in" on just one stock, and it goes down

Index funds grow at an average of 10% a year (with some up and some down years). But if you don't have time to research stocks, and trading feels intimidating, then investing in Index funds is going to be your best bet... I ONLY invested in index funds for the first half of my investment journey, and I was able to accumulate over $1 million in my account. So it is possible to grow your money with just Index Funds. I only started dipping my toes into trading stocks once I had educated myself in trading.

Typically there are lower fees associated with buying and holding index funds because you aren’t paying trading fees or high management fees. Index fund managers tend to charge really low fees because their funds follow the major indexes of the market. Also, index funds are not usually actively managed (actively managed funds are managed by a team of financial advisors trying to beat the market).

You can save money on capital gains taxes by buying and holding index funds longer-term instead of “trading” in and out of stocks. Generally, you’ll pay higher taxes (capital gains) if you are trading in and out of the market. We'll talk about how you might be impacted by your investments and offer up some tips towards the end of the course.

Index funds allow you to grow your money passively thru compounding. With compounding, you can let your money accumulate by reinvesting the interest and earnings. This means your money starts making money for you. Investing in assets like index funds is an easy way to grow your money passively! 

Finally, investing in Index Funds is a pretty laid-back way of investing if you choose to just allow your funds to grow without trying to time the market. If you also set up automatic monthly deposits into your investments, you don't even need to remember or make much of an effort to send money to your account.

Here are the 3 tools you need to get started with investing in Index Funds

1. A free research tool like Yahoo Finance or CNBC
   
2. The Compounding Interest Calculator
3. A brokerage company such as Vanguard or Fidelity

Don't worry if you don't know what to do with these apps just yet. I just want to introduce them to you as we will be using them throughout the course.You can download them onto your smartphone or bookmark them on your laptop.

Lesson Summary

The stock market is a good place to invest because it allows you to use your own money to buy ownership in individual companies and keep your money relatively liquid. Investing in index funds is a great way to start as they act as a “basket” or collection of stocks, as well as:

• Having lower fees
• Being diversified
• Grow 10% on average a year
• Save on capital gains taxes
• Grow your money passively thru compounding

Trading individual stocks is possible, however there is a steep learning curve and will require more effort in researching individual stocks. Index funds could be used for the first part of a journey into investment, before advancing to individual stocks.