Stocks and How to Invest in Stocks Explained in Six Questions

Share this article

The complicated stuff in life gets a little less complicated when you break it down into six basic questions: What, Why, Who, Where, When and How?

What are stocks?

Stocks are an investment in a piece of a company. Also known as “shares” or “equity” stocks play an important role in many investment portfolios.

Why do they matter?

They allow ordinary people to build wealth and companies to raise money. People invest in stocks for a variety of reasons, but primarily, it’s to get a return on investment. When you purchase stock in a company, you’re literally investing in the success of that company. The goal is that over time, you expect to earn a return on your investment either because 1) the stock price goes up, or 2) the stock pays dividends to its investors. 

Who can purchase stocks?

Any individual, typically 18 years or older, can open an account to buy stocks. Some companies or brokerage accounts require a minimum amount to invest. 

Where are stocks traded?

The primary place stocks are bought and sold are on exchanges, such as the NASDAQ or the New York Stock Exchange (NYSE). Think of these exchanges as places where buyers and sellers are constantly trading goods of value – like any other marketplace.

When can you invest in stocks?

You can buy stocks at any point in your adult life, but the longer you hold a stock, the more likely you are to realize long-term value.  

How to invest in stocks?

There are a few options, depending on your situation: 

  • Your company’s retirement plan, like a 401(k), is a good place to start. A 401(k) will typically include a mix of stocks and bonds. Ask HR for plan options and what type of stocks are invested in your plan.
  • If your company doesn’t offer a retirement plan or you work for yourself, you may consider an Individual Retirement Account (IRA), which will typically contain some stocks.
  • You can also look into an individual brokerage account, which is finance-speak for an online account where you can invest your money. Just research your options to understand what sort of support you’d like (think: researching and selecting stocks, investment advice and access to human support). You should also understand what sort of fees are associated with the account.

In all cases, it’s a good idea to talk to a financial advisor, or consult a professional before investing in stocks.

This article is for informational purposes only and is not a substitute for individualized professional advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA is not providing any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.

Investing involves risk, including the potential loss of money invested. Past performance does not guarantee future results. Neither asset diversification or investment in a continuous or periodic investment plan guarantees a profit or protects against a loss.