Why the stock market? Let’s face it; when we think of the stock market, we don’t think of the black community. For the black community, the stock market is something for rich white people and that line of thinking is one of the biggest travesties going against the black community today. The stock market is the purest representation of “Free Enterprise” that America has to offer. The stock market is, and always has been, open for the black community to build generational wealth, but we normally don’t take advantage because we don’t know the much about it.
The stock market is the best money making machine that America has to offer because it is free from any kind of bigotry and racism. The stock market does not care if your credit is good or bad. The stock market does not care if you are rich or poor. The stock market does not care if you have a doctorate degree or if you are a high school dropout. The stock market doesn’t care about your age, race, sex, sexual preferences, religion, political affiliation, if you are rich or poor, and the stock market doesn’t even care if you have a criminal back group. if you can open a bank account, the stock market is there waiting with open arms for you.
There are many ways to make money in the stock market besides stocks. You can buy options, forex, and futures. There is also crypto currency, however, that has its own market right now. Every different commodity /security sold in the stock market has its own set of rules, styles of buying and selling, and regulations. Stocks is the most common way that people are introduced to the stock market, so for the sake of this blog we will just stick with just stocks.
What are stocks?
Corporations are either private or public. With private corporations, the board of directors usually has shares and at times they can distribute shares to all their employees. A share is a micro portion of the company. When you own a share, you own a very small piece of that company. Now, let’s say that the private corporation has plans to grow and make more money but they don’t want to go the traditional way of taking out a bank loan because they don’t want to start paying that money back with interest.
Our private corporation can choose to go public with an IPO (Initial Public Offer) and start selling their shares to the public. Now billons of people have access to the company’s financials and can make an educated decision on whether or not to buy shares in the company. Now millions, or even billions of people can own a piece of the company which allows them to get a piece of the profit. Let’s take a very basic look at how that works.
Let’s say that our Corporations IPO is $1.00 a share. You want to get in on the action so you but 100 shares which comes to $100.00. Three months down the road, out corporation reveals their quarterly report and it is good news. People throughout the world see this news and begin buying shares of our corporation. The sales of the shares drives up the price of each share from $1.00 a share to $2.00 a share. Our $100.00 investment has now grown to $200.00. This is a very simplistic explanation of how it works, but this how it works in a nutshell.
From this point you can keep your money in with the company, which is called an open option, or you can sell and close your position. People make money buying shares low and selling the shares at a higher price. You can hold on to the shares for a few seconds or you can hold them for years. It all depends on your strategy and how much money you are looking to make.
Where do we go from here?
If you are still reading this, then I must assume that you are eager to get started in the stock market. The very first step is to open a brokerage account. A brokerage account, also known as a securities account, is a special account designed for the stock market so you can buy and sell shares. Most brokerage firms will allow you to open up an account with no money down. Go to the following link to find out about the most popular brokerage firms out there today. I use TD Ameritrade and always recommend it for beginning traders because their customer service is awesome.
https://www.nerdwallet.com/best/investing/online-brokers-for-stock-trading
The one thing you need to understand about these brokerage firms is that they primarily make their money from you buying and selling shares. Every time you buy and sell shares, they charge you a fee, usually between $4.00 and $7.00. Ultimately the brokerage does not care if you make or lose money, however, the good brokerage firms understand that if people keep losing money, that people will stop trading. This is good news for you, because the good brokerage will become your number one fan and provide you with as much materials as possible to succeed. Once you get more sophisticated with the stock market you can have multiple brokerage accounts. There are generally three types of brokerage accounts you can have.
Many people who are good within the stock market has what is called an “IRA account” which is for retirement. With this type of account, you can deposit a certain amount of money into the account each year and you are not taxes as long as you don’t take any money out of it. This type of account is usually used for blue chip, long term trades. Blue chip stocks are bread and butter companies such as McDonalds, Apple, Wal-Mart, Microsoft and so on. Companies that are household names that are not going anywhere anytime soon.
Cash Accounts are King
The most simple of account type of account is called a “Cash account”. This type of account is plain and simple. Whatever money you have in this account is all you have to use for buying and selling stocks. The transactions usually takes about 72 hours to complete. If your securities account has $1000.00 and you use $200.00 to buy and sell shares, that money (-/+ profits) will not be available to you for up to 3 days. Cash accounts uses various checks and balances to make sure that everything is on the up and up.
This final account type is my favorite and what i strongly recommend for everyone to have. This type of account is called a “Margin Account”. With a margin account to can buy other securities such as options. Unlike the cash account, the transactions are instant. Another great benefit with margin accounts is the ability to short a stock. Shorting a stock is how you make money when a stock is going down. The biggest benefit to having a margin account is leveraged money. Once your securities account reaches 2k, the brokerage company can match what you have so you can take on bigger trades. As great as that last part is, please note that if the trade does not pan out, the brokerage must get it’s money back.
By now you should know what the stock market is, how to select a brokerage company, and what type of accounts to open; now comes the fun part and that is learning how to trade. You can go to the book store and buy books, go to YouTube and watch countless videos, or you can join the facebook group called Black on Black Wealth (https://www.facebook.com/groups/589316754864950/) where I show you how to go in and out of stocks almost every morning.
Join me next time as we discuss how to fund your account.
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