First let’s figure out what buying a stock means and how do to it.
“A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.” (Investopedia)
When you purchase a stock you are investing in a company, ideally a solid one that will provide returns on your investment by performing well for years to come, which will raise their stock price.
How do you buy a stock?
First decide if you want to go through an electronic broker or a face to face broker. Some electronic brokers include, E-trade.com, TD-Ameritrade, and Center point securities.
They all have their pro’s and con’s.
Then pick a company you want to purchase stock from, which comes after you do extensive research and have come to your own conclusions why you think it’s a good investment.
Set an order to buy the stock through your broker and there you go, you’re now an investor in that company.
How does Warren Buffet pick the right stock?
Warren Buffet, has a net worth of $90.3 billion. Almost all of which has been made by investing in the stock market…
He uses a strategy known as value investing. He wants to find a company whose value exceeds its stock price.
Warren Buffet wants to make sure the company he invests in has great leadership/management.
He looks for companies that have a competitive advantage…a “secret sauce” If the product can easily be replaced or competed against then it’s not a great investment for him.
A Business He Understands
Buffet will never invest in a company he doesn’t understand, simple as that.
You must know the business/product in and out.
Value Exceeds the Price
“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” – Warren Buffet
Cashflow & How It’s Used
Is the company generating good cash flow and are they using it to make more?
You should try to learn how to read financial statements if your going to get into value investing, it’s a great skill to assess a company fully and fairly.
Whether this article served as a refresher or newfound information, you should vastly consider stocks. They are a form of passive income that can make you a fortune.
Furthermore, if you need a mentor, I suggest Warren Buffet. If you learn about him, read his books, watch his interviews, and documentaries, perhaps you could follow in his footsteps and begin to make money like a boss.
We’ve laid out some of the best investing books and Warren’s #1 recommended book as well, ‘The Intelligent Investor.”