Stock market investing can be intimidating, overwhelming, and an uncomfortable task to take on, especially if you were not exposed to it growing up—whether it be at home or in school.
According to the annual Ariel-Schwab Black Investor Survey, 55 percent of Black Americans participated in the stock market compared to 71 percent of white Americans in 2020. Although there are more Blacks, specifically younger Blacks, investing in stocks than ever before, there is still work to be done.
One of the main reasons Blacks don’t invest in the stock market is not only due to the lack of familiarity, but also due to the lack of trust in financial institutions. And rightfully so, based on institutions’ historical treatment of Blacks from the results of the Freedmen’s Bank to redlining.
If we can trust spending our hard-earned money with companies that refuse to have our best interest at heart, then we can make it a priority to trust financial institutions that provide us the opportunity to invest in those companies.
This is our moment to be active participants in closing the wealth gap and build intergenerational wealth—the ability to pass down assets for more than one generation. However, it’s imperative that investing is a part of the narrative. We can start by investing in the companies that own the products and services we support and use every day.
Once you are provided with a step-by-step guide on how to invest in your favorite companies, you’ll feel confident not only in your consumerism but also in your ownership. Here are six steps to help you start investing in stocks in less than 14 days:
Write down the companies you financially support.
One of the best places to start is to write down the places where you spend your hard-earned money. This can be in the form of where you shop to survive day to day, reward yourself and/or pay a recurring bill.
One of my personal investing philosophies is if they [companies] are making money from me, why can’t I make money from them? You can easily track the companies you spend with by reviewing your debit and credit card statements. Here’s how you can breakdown businesses into different categories related to your everyday spending (money & time):
Financial Institution(s): Which financial institution(s) hold your mortgage, checking, savings and credit accounts?
Food & Drink: Where do you buy your groceries, morning coffee, kitchenware and wine and spirits?
Clothes: Where do you shop to purchase your dress and casual outfits?
Technology: Which companies help you stay in touch with your family and friends and meet others?
Check to see if those companies are public.
First, understand the difference between a brand and the company itself. And know that some companies may be owned by a parent company. Companies owned by a parent company are called subsidiaries.
A brand versus company example would be Air Jordans and Nike, Inc. A subsidiary versus parent company example would be Converse vs. Nike, Inc. as Nike owns Converse. (Disclaimer: this is for example purposes only and should not be used as investment advice.)
A public company issues shares of stock to the public, whereas a private company is solely owned by family, company founders and/or institutional investors. In the examples above, Nike is a public company.
A simple way to know if a company is public or not is to search: “[Name of company] stock.” If a company is public, a stock chart would appear on the first page of your search results.
Become familiar with the company’s values.
Before investing in any company, you want to know about the moves they’re making (or the lack thereof). You want to familiarize yourself with their leadership, values and overall business model.
Does the company value diversity, sustainability, innovation and all stakeholders (including employees and communities)? Are their actions or moves reflective of your own values?
Understanding the morals of a company can help you determine if it’s something you want to invest in. When investing, you shouldn’t see it from the lens of betting on a stock price going up, but rather believing in the business and what it stands for.
Create a stock watchlist.
A stock watchlist is a tool that helps you monitor the companies you are interested in investing in. Watchlists help you track the company’s current stock chart, price and news. It allows you to make well-informed decisions about when to buy stocks based on the criteria you’ve created for yourself.
You can easily create a stock watchlist on sites such as Yahoo Finance or apps such as the Stocks app if you’re an iPhone user.
Open a brokerage account of your choice.
After you have created a stock watchlist, it’s times to open a taxable account known as a brokerage, where you would buy and sell individual stocks and/or groups of stocks known as Exchange Traded Funds.
Opening a brokerage account is a quick, easy and seamless process which normally takes less than five minutes.
Companies such as Fidelity, Charles Schwab, Vanguard, Stash, and Public are a few well-respected and highly recommended brokerages. An ultimate brokerage offers no trading fees, fractional shares, an easy-to-use web and app interface, digestible financial education and most importantly asset protection.
Just like the money in your bank account is protected by the Federal Deposit Insurance Corporation (FDIC)—up to $250,000, your investments should be covered by the Securities Investor Protector Corporation (SIPC).
Create an investing plan.
Before you invest, you should be saving to invest. The goal is to save first and then invest because the art of investing is mastered by being strategic.
Here’s an ideal cycle when investing in stocks, called the STICK method:
Save – Track – Invest – Copy – Keep Calm
Save: You can put away $25, $40, $60 a week directly in a savings account or in the brokerage’s cash account. This action builds discipline so you can have a good enough amount to pull the trigger on your favorite companies.
Track: Paying attention to the movement of the company and its share price helps you determine an entry point to buy the stock. Every three months, public companies release their financial standing— such as their revenue, expenses, cash on hand and future projections.
Invest: After you’ve become comfortable with the price at which you want to purchase the company shares, this is your time to act and pull the trigger. During this process, give yourself grace because your price may not always be in your favor.
Copy: Building true wealth requires investing to be a perpetual habit, not a one-and-done activity. Intentional investors repeat their strategy of buying stocks when they are on sale, not when they are soaring. Buying stocks should be like shopping at an outlet mall or Amazon Prime Day.
Keep Calm: Contrary to the stock market many are used to, stock prices decline at times. It can be due to specific company news, bad earning reports, geopolitical news, or epidemics among other things. Although it’s important to understand the reason stock prices decline, it is more important to stay loyal to your strategy and goals. Focusing on the short term when investing is one of the easiest ways to lose money because that is when fear, not freedom, is on the agenda. If store sales don’t scare you from buying, sales in the stock market shouldn’t either. One of the greatest stock investors of all-time Warren Buffett once said, “Be fearful when others are greedy and greedy when others are fearful.” Keep calm, stay the course and build long-term wealth.