So you may have heard that Wombat now offers ‘instant investing’! This is the ability to buy and sell shares on the stock market during market hours.
This sounds like a great opportunity to explore the makeup of the stock market, how it works, and the importance of having a long term mindset when investing. Ready to get started?
The stock market is a collection of individual companies. These individual companies make things that you may use or consume every day - Coca-Cola drinks, Nike trainers, Apple’s iPhones, and so on.
Each of these individual companies has employees, from the CEO down to the interns. They have offices, many, all around the world. They may make products or offer services, or a collection of both.
Once a company has gets to a certain size they sometimes try to ‘go public’. This means that they become listed on a stock exchange and investors like you and me are able to buy and sell their stock (more on this later!).
Each of these public companies or stocks has a ‘ticker symbol’. This is the way we can identify and search for a company if we are interested in buying their stock. For example, Apple’s is $AAPL and Tesla’s is $TSLA - both of which are available on Wombat’s platform through fractional shares.
It’s important to realise that all of these stocks are of real companies. They have employees, are trying to sell products/services, and are trying to make a profit. If you buy a share of that company then you are now a part ‘owner’ in that company. This is the way we need to look at investing into the stock market.
Ask yourself this question before you invest into a stock - would you be happy to be an ‘owner’ of this company?
Now we know that public companies are stocks, let’s talk about how we are able to buy and sell them via a stock exchange.
Some famous stock exchanges are the London Stock Exchange (LSE), New York Stock Exchange (NYSE), the NASDAQ and Shanghai Stock Exchange (SSE). Apple is traded on the NASDAQ, the same as Tesla.
Stock exchanges have certain hours that they are open during the day, usually roughly inline with the usual Monday to Friday working day:
All of these hours are in local time.
As you can see the hours that stock exchanges are open varies slightly. Stock exchanges are only open Monday - Friday, and usually closed during public holidays. Hence, stock prices only change during these times when the stock exchanges are open for trading.
When a stock exchange is open we, as investors, are able to execute instant orders. This means we can buy and sell stocks instantly at the displayed price.
Instant investing is something that Wombat offers!
Instant investing is exactly as it sounds, we are able to invest instantly into our favourite stocks that are listed on stock exchanges.
Apple is listed on the NASDAQ and this stock exchange is open 9:30am - 4pm US eastern time. This means that during these hours we are able to place an order for Apple stock, which has a ticker simple $AAPL, and then within a few moments we are the owner of some Apple stock.
The process of investing and executing an instant investment is actually very simple. We go into our investment platform, search for ‘Apple’ or ‘$AAPL’, input how much we would like to invest and then the order will be executed immediately and we are now a part-owner of Apple.
‘But what if I don’t have enough money?’ Welcome to the world of fractional shares!
Fractional shares are another feature that make investing even simpler, and are something that Wombat offers, as if we don’t have $160 to invest into one full Apple share we can invest $40 to buy 1/4 of an Apple share. Becoming an investor has never been easier.
It’s great that in this day and age the stock market is more accessible than ever. Instant investing means that we can buy and sell stocks and exchange-traded funds at our fingertips. However, it’s important to reiterate that a long term mindset is key when it comes to investing.
The stock market, especially individual stocks, are generally volatile in the short term. The media, politics, and world events can create uncertainty and fear in the markets that results in fluctuations in the prices of stocks. It’s important to understand that this is completely normal. On average, the S&P 500, which is made up of the largest 500 US companies:
Do you see how regular this is? Over our lifetimes we will experience a number of crashes and corrections. This isn’t to scare you, but to give you comfort that these things are completely normal. Not to mention that by having a long term mindset and investing time horizon we will be able to ride out these ups and downs.
It’s important to only invest what you can afford and to be patient, as investing is a long term game as we know. But also these crashes and corrections are can be an opportunity to buy great companies at ‘cheap’ prices. If you are a fan of Apple at $160 and then it falls to $80 that means you can buy a stock you’re a fan of for 50% off. Imagine if you walked into a supermarket and everything was 50% off? You’d probably be very happy and buy more than usual!
Having a long term mindset usually comes back to ignoring the noise from the media and continuing to invest consistently over your lifetime, rather than panic selling due to short term noise and problems.
With investing the most important thing is to start investing as soon as you are able to.
Time + compound interest = long term wealth
The sooner we can start investing, even with small amounts, the better as we can start to grow our wealth.