5 Mistakes That Can Leave You Broke

The stock market has had a tumultuous few years.

When the market tanked at the beginning of the pandemic in March 2020, many first-time investors saw an opportunity to get involved. Then the infamous GameStop short squeeze followed in 2021, with many amateurs leveraging resources like investment apps to take down hedge funds and short sellers.

During these unprecedented years of market volatility, online brokers like Charles Schwab, TD Ameritrade, Etrade and Robinhood have seen a tremendous increase in new accounts being opened. Many of those accounts belong to first-timer investors.

Today, with news of inflation, you may be rethinking keeping all your cash in a safe but low-yield savings account. But before you jump into the stock market game, it’s important to know what you’re doing — or you risk losing a lot of hard-earned money.

Are you a beginning investor who’s interested in the stock market? Let’s go over some basics before you fund a trading account.

What Are Stocks?

Also called equities, stocks are a type of security that allows everyday Americans to own a piece of a publicly traded company. A single unit of a stock is called a share, and investors in a business are called shareholders. Businesses sell these shares to fund their own growth, whether that is market expansion, a new product launch or even paying off debt.

In general, if the business makes money, so does the shareholder. The more shares you hold in a company, the more you stand to gain when the stock price goes up — or lose if the price goes down.

As a shareholder, you don’t actually make or lose money until you sell your share (unless the stock pays dividends). You could purchase a share of stock at $5, watch it rise to $10, see it drop to $2 and sell when it reaches $6 — for a $1 profit per share. While stock ownership can be a roller coaster, the only prices that ultimately matter are the price when you purchase it and the price when you sell. Ideally,…

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