Investing in stocks is one way that many Americans boost their savings. The process of investing involves purchasing stocks in a publicly traded company in return for payments from that company due to the increase in value of your investment. In short, you give a company some money, and if they do well, they pay you back over time. 

Earning money from the stock market is a form of passive income, meaning you don’t work to earn that money. In fact, your investment, no matter how small, works for you. There is some risk to investing, since there is never a guarantee that your investment will grow in value. 

Types of Stock Investing

Many people choose to invest in the stock market as a way to build wealth over time, like months or years. If your investments pan out and you see a positive return, you can use the money for a variety of reasons:

• Save for retirement
• Make a large purchase
• Pay off debt
• Purchase more stocks

On the other hand, some people prefer day trading over long-term trading. Day trading in the stock market refers to purchasing and selling shares throughout a single day. The goal is to increase your investment quickly as opposed to over months or years. 

Day trading is not typically considered as a form of passive income because you typically do this as your full time job. You must be active on the market from open to close to make your money. While day trading can be lucrative, it’s more of a way to make money quickly as opposed to making money through long-term investment/savings.

How to Invest in Stocks (With a Savings Goal in Mind)

Interested in getting started with the stock market? Here are some tips you can use to help get you started investing in stocks:

• Set up a brokerage account. These accounts let you buy and sell stocks. You have to go through a bank or other financial institution that manages these accounts to create one, and then you can transfer money into the account, buy shares with that money, and receive returns there, too.

• Use an online trading app or site. Some apps let you create an account and start investing with as little as a few dollars (or cents!), like Acorns, which allows you to use “leftover” cents from everyday purchases to invest in the stock market. Others include E*TRADE, TD Ameritrade, and Fidelity, many of which give you (paid) access to brokers, educational materials on investing, and tips for how to improve your strategy.

• Get a stock broker or finance manager. If you are investing a large amount of money in the stock market or are totally new to the game, you might consider hiring a broker to advise you on investments, such as whether you should buy Apple stock or stock futures, and even buy and sell investments on your behalf (but with your approval, of course). 

• Stay on top of stock market news and trends. Do your research and become more knowledgeable about the companies you’re invested in. Learn where the market is moving and which investments may be profitable at the moment. However, be wary of “best stocks to buy now” tips, as they may not be totally founded or true.

• Be mindful of fees. Many apps and financial institutions require you to pay fees to use their services, whether or not you meet with a broker or finance manager.

• Mitigate your risk. Diversify your investments. In other words, don’t put all your eggs (money) in one basket (company or specific market sector). Investing in different sectors, like technology, food, entertainment, manufacturing, and more can help protect you from losing all of your investment if one company or sector starts to crash.