Buying stocks is like buying flowers....
Over the last couple of weeks I’ve had an large number of women reach out to me on my social media platform @sandrakstewart to explain that they are SO confused and overwhelmed about the concept of the stock market. Ive received SO many questions- the most popular being; “How much do YOU invest?” “How much should I invest!?” “How do I get started?” "I can't grasp the concept of the stock market?!" "How does this all work?"
Although I can't assess your personal situation or risk tolerance without knowing personal financial details- I can answer general questions about how the stock market works, and try to simplify this in a fun way that's relatable to an experience most women have had.
So here it is; a cute analogy I thought of whilst buying flowers at the flower market last week-
Buying equities is like buying flowers;
You go to the market and can choose to buy a whole array of food products and locally produced goods. If your family needs food, you are going to obviously buy food. You need to eat first ; this is the same as paying bills and having an emergency fund and savings for your future dreams. Its important to always know your numbers and have a budget- ( try my budgeting DASHBOARD if you need help starting out!)
If you buy what you need first ( food & essentials ) and have a surplus left over you can then head over the the flower stall and buy a beautiful bunch of flowers 💐
Now... buying stocks is like lining up at a flowers stall and seeing a whole range of different blooms at different prices.. which ones do you pick?
Well again it depends on your needs!
Some flowers are beautiful but will wilt the next day, (risky) eg, new up and coming companies, or companies that have no long term past performance or the business model is at risk due to supply or economics. Companies that promise big returns are usually more risky (speculative)
Some are flowers at the stand are easy to recognise (common & popular like a daisy or a rose) these flowers (stocks) are well known & popular for a reason. They represent great quality that will last in your home! They are the (Blue chips) safer stocks, Big well known companies that are established and have strong business. for example Commonwealth Bank, Woolworths or Telstra.
Both these options are like buying INDIVIDUAL stocks. (medium risk)
If you don't want to pick an individual variety of flower to make a bouquet with you also have the option of -
Paying a florist (fund manger) to hand pick flowers (stocks) and create a diverse bouquet 💐 (portfolio) this will cost you a small fee for their work (management fees -usually a percentage)
This is a MANAGED fund... (medium got high risk depending on your mangers selection)
Alternatively you could pick a pre made mixed bouquet 💐 already on the shelf and pay lower management fees as they are bundled together already - these can be exchange traded funds and usually make up a diverse portfolio that's pre weighted with top 200 or 300 companies. This is an INDEX fund... (low risk)
It doesn’t matter how many bunches of flowers (stocks) you buy but rather that you have bought well for your own situation and needs, and understand the risks and differences of each investment. Just like different flowers have different scents and characteristics so do equities, so make sure you buy appropriately for what suits your own needs. for example if you didn't like high risk investments you would not invest in an up and coming speculative tech company with no past records. you would choose a safer option that suits your style much more. The same as if you were allergic to daisy's and they made you sneeze- you would not bring them home!
Some weeks you may be able to buy a BIG bunch of mixed blooms and some weeks you may only be able to afford to pick a smaller single bloom posy. Thats totally ok! Just invest what you can afford too!
As long as you get to the market early ( start saving and investing early in life ) and buy what’s right for you whenever you can afford too! You will see the benefits over the long term.
Like a divine friend of mine cleverly said; if you can’t afford to buy flowers, pick garden herbs and wild flowers and always make the best of what YOU have!
Meaning you can always save, hustle and focus on thriving in different ways until you are ready to go to market!!