Some investors buy stocks to create a growing passive income stream, or a dividend growth strategy. The idea is simple and works, and many real-life stories exist of people building wealth from equities. The question then is how to buy stocks for beginners? What steps are essential to know? What follows is a step-by-step guide that answers those questions and put you on a path to build wealth.
Most workers probably own stocks indirectly through their company’s retirement plan, whether a pension or 401(k). For example, a 401(k) plan will provide employees with various mutual fund investment choices. The funds are managed by an asset manager, like Vanguard or Fidelity, and the fund manager picks the stocks.
Stocks are not risk-free. Most people are familiar with low-risk savings accounts and Certificates of Deposit (CDs) that are, in many cases, insured by the Federal Deposit Insurance Corporation (FDIC). On the other hand, stocks have more risk and investors can lose money because stock prices may decline during a correction or a bear market. For example, in 2022 the broader stock market was down more than (-10%). This decline is considered a market correction.