GREENVILLE, N.C. (WITN) – Popular culture and movies have always made the idea of betting on the stock market and calling it big tempting.
The age of the cell phone and tablet application has made buying stocks easier than ever.
If you have considered it, let's start with the basics: What is the stock market?
"It's a place where companies can raise money to expand their businesses, build more factories," says Scott Below, Associate Professor of Finance at ECU, "You need a solid stock market for a strong economy. The economy that can build companies and increase GDP and create jobs, needs companies to have easy access to capital. "
Then comes the application platform to invest. Applications like Robinhood have billed themselves as stock trades for each person of the day and allow you to easily link a bank account, but Bottom says you should know how applications like this one go green.
"The companies, the brokerage firms that produce these applications, make money based on their operations and, therefore, are trying to encourage you to trade."
And then there is the market supply and demand differential that can eliminate the returns of the active traders, especially if the shares they paid fall in value.
"There will be an offer price that could be $ 20 and a sale price of $ 20.25 Therefore, if at the same time you bought and sold the same shares, you would lose 25 cents on that offer differential and that differential will be extended to The creators, the people who contribute liquidity to the market.
Stock trading is not for the feint of the heart. In fact, Below says that in the last 30 years the average individual investor who buys shares in the S & P 500 has earned a little more than 3.79% per annum.
"The other thing that worries us about applications is that stock trading, options trading, futures trading, all those kinds of things, are a lot like gambling, it's a speculative activity, and if you have an addictive personality, , you can get into it financially, and you can turn a retirement savings into virtually nothing in a relatively short period of time if you're not careful and do not know what you're doing, "says Below.
Next, it is recommended to find a quality stock by doing your research, invest in it and let it grow, instead of jumping trying to catch the next stock of rockets.
"Nobody can predict what the stock market is going to do day by day or moment by moment, and if it is negotiating, that is really what it is trying to do and it is really preparing to fail," says Abajo.