About Buying Stocks

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Buying stocks is beneficial because most companies increase in value at a rate of 8 percent a year, which is a stable way to make money in the long term. Consult with a stock brokerage company to purchase stocks with advice from a personal financial adviser in this free video on stocks and investments.

Part of the Video Series: Stock Market Investing Tips
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Video Transcript

Hi, I'm Roger Groh. Today, we're here to talk about buying stock. Why do it, and how to do it. Well, over the longer term in the Standard and Poor's 500 which is a list of the top 500 companies here in the United States, the growth and the rate of profits of those businesses has been about eight percent a year. Now, you might say, eight percent isn't a whole lot compared to Google which goes up at fifty percent a year or other companies which go up at 40 percent at year. But, there aren't many companies which do it consistently. And if you're going to do it consistently, you'll probably do it at a lesser rate than the big time rates that you see at some of the software or hardware companies. Any rate, why buy stock? Well, today, treasury bills pay zero percent. Long term treasury bonds pay two. You make about one percent in your money market. You're probably losing money in real estate. You're probably losing money in commodities. And that leaves stock. You know today, if you buy anything. If you buy a public company, the earnings do grow at eight percent a year. Well, money compounds pretty quickly. Your money will double. The value of the cash flow in the underlying business if it grows at eight percent a year will double every nine years. It doesn't mean that the price of the stock will double. It may not. But the intrinsic value of that business will. And ultimately, the stock market will value that company. So why buy stock? Because eight percent a year is one of the highest rates of return that you can get in any investment across any category. Now, how to buy. Well, you can goto your local stock broker, which would be wonderful thing because he can solicit research and advice as to what is practical for you to buy and reasonable for your to buy. Or you can go to a discount broker if you think you know what you're doing. The difference is what you're going to pay in commission. In today's world, there may not be a lot of difference. And at the full service broker, you get research which really matters. There's a third... if you decide you really like a business and you want to make a long term commitment to that business, you can actually buy stock directly from them. You can buy stock from most of the major US companies that exist. Now, why do that? Well, you can transfer your stock that you've purchased to somebody else for free in most cases. And a lot of the time the total cost of buying that stock is cheaper if you go directly to the company. So that's a little bit about why buy stock because of the highest rates of return and then last but not least, how to buy it. I'm Roger Groh.

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