Senior assistant business editor Andy Rosen is the guest on the recurring Boston Globe Today segment “Money Moves,” detailing ways to make your money work for you.
If you bought $100 of Apple stock 20 years ago, you’d be sitting on more than $36,000 today, a better return than anything you’ll get from a bank. And anyone can dabble in the stock market.
The process is actually pretty simple. Basically, you want to set up an account with a brokerage. There are many online, including Boston-based Fidelity, E-Trade, and Charles Schwab. Some banks even have brokerage arms in which you can invest money you’ve already deposited.
All you really have to do is: set up an account, put some money in there, and then buy whatever you want to invest in. But the relative ease of buying a stock belies the maddening complexity of actually making smart financial decisions with your money. It’s just as easy, if not easier, to lose money investing in stocks as it is to turn a profit.
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So how do you decide if an investment is right for you?
It all comes down to three things: your personal budget, your appetite for risk, and how much you want to think about your investments. Historically, the stock market has returned about 10 percent a year. So the question is: Can you do better by picking your own stocks?
Studies generally show that individual investors struggle to beat the market, and many lose money trying to do it. Even a lot of professional fund managers, with their staffs of analysts and researchers, can’t beat the market at large.
Is it a bad idea to invest in individual stocks?
I’m not going to tell you how to spend your hard-earned money. Just because people don’t usually beat the market on their own doesn’t mean you can’t. Just know that the odds, writ large, are against you.
Many experts recommend people invest in index funds, which are broad funds that track the performance of some subset of the market. S&P 500 index funds, for instance, are tied to the value of the largest companies listed on U.S. stock exchanges.
And besides, there are a lot of (sadly boring) things you might want to consider doing with your money before making more speculative investments.
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Do you have an emergency fund that could cover your expenses in the event of a job loss or other calamity? Do you have enough saved for retirement? You may decide to devote your scarce resources to building up those reserves, instead.
How can I improve my chances of making money?
Nothing is guaranteed, but preparation is key. Understand that the price of a stock is determined by the execution of thousands of trades per day, and sometimes more. If you think that price is wrong, challenge yourself to make a case for why. NVIDIA went up this year, anyone can see this.
But that doesn’t necessarily mean it will go up more. It might go down. People often gravitate toward stocks that are in the news because they rallied. But once that rally is over, you’re looking to catch the next rally.
Broadly speaking you can do this by either analyzing price and trading trends, or by examining the fundamentals of a company. Do you have faith in their management? Do their products play into a social trend you see coming? Do you think the market has overreacted to recent news?
So what do I do?
Everyone’s different, and no strategy works for everyone, but if you want to know how I think about investing, you can watch the full segment here.
Boston Globe Today airs Monday through Thursday at 5 p.m. on NESN and is available to stream on-demand at globe.com/bgt.
Jenna Perlman of Globe staff contributed to this report.
Andy Rosen can be reached at andrew.rosen@globe.com.