What does buying stock mean?
Buying a stock means you own a small percentage of a company you think will continue to increase in value. Newcomers to the stock market should begin by opening an online brokerage account or through a face-to-face broker. You can skip paying the broker fees if you buy stocks directly from the company. Not all companies provide this option, but there are several hundred who do.
Step 1: Choose a Broker – How to buy stocks?
There are many brokerage firms in the marketplace for you to choose from.
Many of these companies are very similar although some have more user-friendly features or apps that might suit your needs better.
Search for one that offers convenient customer service and quality investor education instead of one that has the lowest trading commissions.
Here are some other factors to evaluate:
- Minimums: The majority of these brokerages have either no minimum or a low threshold like $50 allowing you to build your investment portfolio overtime.
- Trading fees: The commissions for trading continues to drop. Some are free, so if you trade often, you won’t be shelling out as much money in fees. Many others charge an average low fee of $5 per trade. Depending on how often you trade, the fees can add up quickly.
- Broker resources: You’ll also want to consider factors like the kind of advice and research tools from the broker, the quality of the digital trading app and the ability to place trades quickly and reliably, among other things.
Read here the Best Online Brokers for Stock.
Step 2: Select the stocks you want to buy
Once you’ve set up and funded your brokerage account, it’s time to dive into the business of picking stocks. A good place to start is by researching companies you already know from your experiences as a consumer.
Don’t let the deluge of data and real-time market gyrations overwhelm you as you conduct your research. Keep the objective simple: You’re looking for companies of which you want to become a part owner.
Read here the Best Fintech Stocks 2020. How to buy stocks.
Start with the company’s annual report — specifically management’s annual letter to shareholders. The letter will give you a general narrative of what’s happening with the business and provide context for the numbers in the report.
After that, most of the information and analytical tools that you need to evaluate the business will be available on your broker’s website, such as SEC filings, conference call transcripts, quarterly earnings updates and recent news. Most online brokers also provide tutorials on how to use their tools and even basic seminars on how to pick stocks.
Step 3: Choose number of shares to purchase – How to buy stocks?
Experts advise investors, especially novice ones to trade carefully. Making smaller investments over a period of time decreases the amount of risk. You can even buy just one or two shares of company until you understand how the company operates or how different trading strategies play out. Once you get comfortable, you can purchase stocks in groups of 5 or 10 shares at a time and build your position over time.
Step 4: Pick your order type – How to buy stocks?
After evaluating a stock, decide the prices you would like to purchase it at. Determine ahead of time if you want to make a “market” or “limit” order. A market order means you will buy or sell the stock at the best available price that is available. A market order means as soon as you hit the submit button on your laptop or app, the order will occur immediately and will fill. A limit order means you will only buy the stock at a specific price that you choose. If you enter in an amount that is too low and there are no buyers, your order will not be filled.
Step 5: Optimize your stock portfolio
We hope your first stock purchase marks the beginning of a lifelong journey of successful investing. But if things turn difficult, remember that every investor — even Warren Buffett — goes through rough patches. The key to coming out ahead in the long term is to keep your perspective and concentrate on the things that you can control. Market gyrations aren’t among them.
How to buy stocks.