Investing in the stock market can be fun and exciting. However, beginners should not allow the excitement to get overwhelming or they may start making bad decisions. Once you’ve set aside enough money to get started, you’ll need to find a broker, sign up, and begin trading. While the process is straightforward, it can be daunting for those who have never bought stocks online before. Don’t worry. The process isn’t too difficult. Below, you’ll find out how to start buying stocks right now.
Before doing anything, you’ll need to find a broker. This is the middle-man so to speak. The broker is responsible for taking your order and fulfilling it on the open market. You’ll find out that your options are plentiful. For instance, you can choose E*Trade, TD Ameritrade, Robinhood and many others. There are several things to consider when attempting to choose a broker that suits your needs.
- Account Minimum – This is the amount you’ll need to deposit before you can open an account. If the account minimum is $500, you’ll need to deposit $500 immediately or you will not be able to open an account.
- Commissions – When making a trade, you’ll likely be required to pay a commission. This is the fee the broker takes for carrying out the trade for you. You will pay a fee when you buy or sell a stock.
- Promotions – Finally, you’ll want to look for promotions. With certain promotions, you’ll receive additional money for depositing a certain amount. Or, you’ll receive several no-commission trades.
It is vital to weigh the pros and cons of each broker when making your decision. Once you’ve signed up, you’ll need to move money to your brokerage account. There are numerous ways to do that. For instance, you can wire transfer the money or deposit money via a check.
When signing up for a brokerage account, it is pertinent to choose a company that offers excellent support. However, you need to find out how much support you want. Would you prefer to carry out the research on your own or do you want help from a professional? Remember that each broker offers a unique set of research and educational tools. Find the broker that best fits your needs in this category.
Finding Stocks And Choosing The Number Of Shares
Now that you’ve got your brokerage account open and funded, it is time to begin looking for stocks. This is the most difficult aspect of all and it will make or break your venture. As someone who is investing in stocks for the first time, it is a good idea to choose companies you know and companies you’ve dealt with before. Take the time to research these companies and their stock’s performance.
When you buy a stock, you’re buying a piece of the company. Make sure that you’re comfortable with this idea before pulling the trigger. It is better to invest in companies you believe in. Investing in a stock simply because you want the stock to go up can be risky. It is wise to check each company’s annual report and annual letter to shareholders before moving forward.
You can also use tools provided by your broker to conduct a thorough analysis of the company in question. Make sure that you’ve put in significant time and effort before buying a company’s stock or you may regret it.
How Many Shares To Buy
There is a good chance that you’re stumped here. Beginners may believe that having a larger number of shares is better so they’ll stick with cheaper stocks. This is generally not a good idea. It is wise to start small but you should stay away from risky stocks like penny stocks. While you may be able to buy 10,000 shares of a $0.05 stock, that stock’s price will likely not climb. Or, it may not climb enough to generate a worthwhile return.
In other words, it is often best to buy a more expensive stock even if you can only afford a few shares.
It is vital to fully understand order types before placing your order. Below, you’ll find out more about stock trading terms.
- Ask – The ask is the price sellers want for the stock they’re selling.
- Bid – This is the price buyers are willing to pay for the specific stock you’re dealing with.
- Spread – The spread is the difference between the lowest ask price and the highest bid price.
- Market Order – This is your request to buy or sell a stock as quickly as possible at the best price.
- Limit Order – With a limit order, you can request to buy or sell a stock only at a certain price.
- Stop Loss Order – The stock loss order is very important. Once you’ve set a stop loss, the market order will be executed when the specific price is met. This is a good tool for locking in returns and avoiding significant losses.
- Stop Limit Order – Once the stop price has been reached, the trade will transform into a limit order. Then, it will be filled until the specified price limits are met.
As you begin to experiment more, you will find ways to use these things to your advantage.
Optimize And Diversify
Now that you’ve bought your first stock, you should not stop there. It is pertinent to diversify your stock. If you’re sticking all of your money into a single stock, it could come back to haunt you. Instead, you should buy several stocks so you can hedge your losses. If you lose out on one stock, you may win on another. That will offset your losses making them far less crippling.
It is vital to keep a close eye on brokerage fees since they can reduce your earnings. Be cautious and make the best investments possible.
Don’t Stop There
Ultimately, the markets never stop moving. Even when the markets are closed, things are going on behind the scenes that will impact the prices when the markets open. Therefore, you need to remain on your toes and continue improving your chances of finding success. It is wise to be aggressive about learning as much as possible. You can find many excellent stock market books on Amazon and you should read trading blogs online.
Once you’ve found success, you should follow up on that success to ensure satisfactory results!