Most people who make a plan for their future will eventually look at buying stock as an investment option. Some people will begin investing sooner in life than others and there are many ways to buy your first shares of stock. Some will acquire stock through the company they work for while others will open an IRA or investment account on their own. No matter how you came to the decision, buying stock is one of the most important aspects of investing for your future.
For those who are just beginning to invest, buying stock for the first time can be very exciting and also somewhat stressful. There is a
famous that states, "Knowledge is Power," and that holds very true in investing. By educating yourself on the basics of investing in stock,
bonds, gold, and other commodities, you will gain the power to make knowledgeable decisions that will affect your future and often the future of those closest to you.
This article will give you the knowledge of how to start buying stock,
where to buy stock, what types of stock you should look for and how to make good decisions when buying stock online or with a broker. What this article is not is a get rich quick guide on investing in high-risk
investments. Instead, we will focus on building wealth over a long time
period, be it five years, ten years, or more. Feel free to browse our selection of articles and please share the articles with friends and family who could benefit from the information they offer.
Buy Stock Online
Once upon a time, purchasing stock in a publicly-traded company that listed its shares in a major exchange was restricted to a privileged few. Potential investors had to rely on brokers for everything, from selecting which stocks to buy to actually placing trades. Brokers charged high commissions and investors had almost no control as to how their money was being used. Thanks to the advent of the Internet, individual investors can easily buy stocks online without having to pick up the phone to call greedy and obnoxious brokers.
The ability to buy stocks online has been of great benefit to investors. One of the major problems with phone-based trading in the past was that the client could not see the actions of the brokers, or at least not until their trading statement arrived in the mail. A broker could take too long to enter a trade order, or even enter it incorrectly. With online investing, an individual can safely buy stock online and enter an order directly on an electronic trading platform; bypassing the broker and thus avoiding delays and errors.
Most online brokerages these days conduct trading activities on Electronic Communication Networks (ECN). The use of an ECN greatly improves trade executions and reduces transaction fees. ECN systems also provide relevant real-time data that is extremely useful to investors. Most individual traders who buy stock online these days do so through an ECN.
The use of ECN systems has sharply reduced the size of trading commissions and other administrative fees. Online stock brokerage firms charge very low commissions these days, generally much cheaper than buying stock through a broker. Depending on the different individual investing styles, it could cost as little as $4 to buy stocks online. The fee structures vary greatly from one brokerage to another; some online trading firms offer their customers flat-fee trading, while others will base their commissions on account minimums and how frequently they buy stocks online. Trading fee discounts and commission waivers are also common strategies for online brokerages to encourage investors to open accounts.
Investors who wish to buy stock online should take advantage of the vast amounts of research available on just about any stock. Professional traders who buy stocks online spend a considerable amount of time doing research on different financial topics. Properly conducted research will let an investor know when is the best time to buy stock online. The best part of online research is that it is often free. A lot of companies spend a considerable amount of time and effort in reaching out to potential investors, and thus a great deal of financial information is available on company websites. Publicly traded companies must electronically file their financial statements with the Securities and Exchange Commission (SEC). Anyone looking at buying stock online should first visit the SEC website and obtain unbiased information about the financial health of the company they are interested in.
For newcomers to online investing, the Internet is a great place to learn. There are thousands of websites dedicated to investor education. Online investment communities offer smart advice and guidance to those who buy stocks online. Financial news media outlets such as the Wall Street Journal have been educating online traders for decades.
At any given time, hundreds of thousands of investors buy stock online. The safety of their accounts and transactions is paramount to each of them. Seasoned online traders can initiate transactions 24/7 from just about any location, but they only do so when they feel they are safe. Most modern computers and smartphones can be used to buy stocks online, but these devices must first be screened for potential security threats before accounts can be accessed. Firewalls, antivirus and anti-spyware programs must be used, and public or shared computers should be avoided for online trading
Buying Stock Online
Buying Stock Online these days, a lot of people spend a good amount of time on the internet. We can connect with friends and family online, bank and pay bills online, and even order our pizza online. It is only natural then, that we would want to begin buying stock online. After all, it is convenient, our account information is secure and always available, we can research on our own time and finally, buying stock online is much cheaper than working with a live stockbroker.
Sure there are some definite advantages to buying stock with the help of a broker, and in some cases, that is even the best choice. However, for many of us, buying stock online is a great way to learn about investing and become closer to our portfolio. After all, it is important to understand and have a reason for every share of stock that we own.
The process of buying stock online is really quite similar to buying stock through a broker. The main difference is obviously that you will not be speaking with anyone (in most cases) so everything is handled electronically. The first thing to do is to decide which online broker is best for you.
Online Stock Brokers
There are a large number of online brokers available and each has advantages and disadvantages over the other. For most people, price is a very large factor. However, that should not be the sole reason for choosing one broker over another. Other important factors are service, research availability, investing options (types of accounts, foreign trading, investments other than just stocks), and the site’s interface. By that, I mean how much you like the site. Is it easy for you to find what you need? Does it just feel comfortable browsing the site? This may seem somewhat trivial, but in the end you will be spending considerable time on the site and your time is valuable. You should be sure that the site simply “makes sense” to you before you lock up your hard-earned money on a site that frustrates or confuses you.
Opening an Online Trading Account
Once you have chosen your trading site, you must open an account. Since the whole process is done electronically, you can complete this step at your own convenience. No need to take time off work to visit the local broker during his business hours.
You will need to provide proof of identification such as a driver’s license, passport, or some other government-issued picture id. You will also have to provide personal information. This includes further identification (social security number, etc.) as well as employment information. They will also ask for financial information such as bank accounts and other investment accounts. It may seem like they are asking for a whole lot of information, and they are! Unfortunately, it is required by the various KYC laws, also known as Know Your Customer laws. These were enacted to help fight against terrorism and money laundering and are simply part of life in this day and age.
Once you provide this information you will be required to electronically “sign” your application. This basically provides proof that you have read and understood all of the terms and that you have provided truthful information. Most of the time, this is all that is needed. On occasion, the broker will need more information and may contact you, but that is rare.
You now have an online trading account! Now you need to fund it.
Funding an Online Trading Account
Most online brokers will provide a number of different options for funding your online trading account. The most common, and frankly, most convenient option is usually to link your bank account to your trading account. This allows for fast transfers of cash from one account to the other, both ways. It also will usually allow for instant stock purchases once your account is verified. That means you can initiate a transfer, then buy stock online, even though the transfer has not completely processed yet. This feature comes in handy when you find a great buying opportunity but do not have any cash in your online trading account.
Alternatively, you may simply mail a check to the broker to fund your account. This is a good option if you have no immediate plans for the cash and have a set amount of money that you would like to invest in. You will have to wait for the company to receive your check, however, before you can make a stock purchase.
For quicker service, you could also initiate a wire transfer. Your online brokerage will provide the transfer information and you can fund your account in a short time.
Finally, if you already have an account elsewhere you can transfer in cash, stocks, and other securities to your new account. This is especially useful for people changing jobs. Often upon leaving one company, you are given the option to rollover your 401k or other retirement funds into a new account. Most often this is rolled over into an IRA or a Roth IRA, which is done to avoid any fees or penalties. While some choose to keep their 401k right where it is, rolling it over to an IRA gives you better control of your investments and offers a wider variety of investment options than most 401k’s provide.
Your online broker will help guide you through the transfer process, which again, is done electronically. However, many brokerages give you the option of working with someone to help transfer your account. This is especially helpful for someone who is new to the process.
Buy Stock Online
With your account open and funded, you are now ready to buy stock online. If you already know what you wish to purchase, then it is simply a matter of opening the site’s order screen and placing your order. You will need to enter the stock’s symbol, the number of shares to buy, and the type of order. You will usually place a market order as the type, which simply means to purchase the shares as soon as possible and at the best price available. Confirm your order and the broker will process it nearly immediately in most cases, assuming of course the market is open.
If you do not know which stock you would like to purchase, it is time to start the process of researching stocks online. This guide will show you how to get started on finding the right stocks for you to purchase.
Those who are buying stock for the first time will usually feel a bit of apprehension at the thought of becoming a shareholder. The usual doubt creeps into your mind. Did you buy the right stock? Is this a good time to buy? Am I making a mistake by buying the stock right now? This article will attempt to put your mind at ease through education and general investing advice. We invite you to read more of our articles on buying stock and feel free to contact us if there is something you would like us to cover.
Buying Stock Through a Broker
buying stock with a stockbroker. There are basically two ways to buy stock. You can work with a live broker or you can buy stock online through an online trading company. Buying stock online is a great option for those who have the time, the desire, and perhaps the knowledge to research their own stocks and come to a decision about which shares to purchase. However, not everyone has these resources. Not everyone wants to learn about price-to-earnings ratios or to spend time finding companies that fall in line with their investment goals and ideals. For these people, buying stock through a broker is a better idea.
Functions of a Stock Broker
Brokers go by many names including stockbrokers (or stockbrokers), financial representatives, financial advisers, dealers, and financial planners, among other things. Each of these is not exactly the same thing, but most can perform the functions of a stockbroker, which is to execute trades through a stock dealer at various stock exchanges around the world. Basically, the stockbroker is the middle man between the buyer and the dealer. They must be licensed and are regulated by the appropriate governing body, such as the Securities and Exchange Commission or SEC.
Most brokers also offer advice and recommendations to their customers. Depending on their qualifications, some may also be allowed to make trades for you, with your permission. A certified financial planner, for instance, maybe authorized to implement a plan that is developed with your input. For our purposes, however, we will discuss more traditional brokers.
The stock broker’s role is to recommend stocks, bonds, and other securities to add to your portfolio in order to meet with your investment objectives. In order to accomplish this, the broker must know and understand your objectives, otherwise, it would be difficult to recommend investments that line up with them. Not only is it the law that he only recommends investments that meet with your objectives, but it could be financially disastrous for you if your broker recommends stocks outside your investment goals.
Choosing a Stockbroker
With this in mind, one of the most important steps when choosing a stockbroker should be accomplished in the initial meeting. Before the broker recommends anything, he or she should make it a point to get to know you, your financial situation and your financial goals. Brokers who make recommendations that are clearly outside your goals could be held liable for their actions.
You should make sure you are comfortable with your broker and that there is a level of trust. Although most of the time the broker cannot initiate trades in your account, it is still important that you trust their recommendations and believe that they have your best interests at heart.
The fees are an important aspect to cover during the interview process. Brokers who are not comfortable talking about fees or try to skirt the subject might not be the best choice. Fees are part of the investment process and there are a number of fee structures used by different companies. Not knowing or understanding the fees can potentially be very costly in the future so it is best to get it out of the way right from the start. The fees that a live stockbroker may charge will likely be much different than that of an online broker. It is important to understand this and to know what you are getting for the price difference.
Opening a Brokerage Account
Once you have chosen your broker you will then need to open an account. This process requires proper identification such as a driver’s license, passport, social security card, and other information. They are required by law to collect and record this information as part of the Know Your Customer laws (KYC) enacted to fight money laundering. They are also required to inquire about employment information and additional financial information as well as your investment experience. Although it may seem a bit invasive, the information is required and is technical to help protect your rights since the broker can be held liable for irresponsible recommendations.
Funding Your Stock Trading Account
Most brokers offer a few options for funding your new account. If you already have an account elsewhere you can transfer it to the new broker. This occurs most often when rolling over a 401k after switching jobs or even at retirement. The broker will walk you through the process, which may take a few days.
If you are funding accounts without a transfer, they will likely take cash (up to a certain amount), checks, money orders, and even bank wires. With your account funded, you are ready to start buying stock!
Buy Stock With Your Broker
Usually, the broker will have made a recommendation for the stock, mutual fund, or other investment to purchase. Once your account is open and funded, you and the stockbroker will discuss the purchase and then you must confirm your desire to buy the investment.
Once confirmed, the dealer will place the order at the time you discussed (usually right away) and the order will be filled shortly thereafter (almost immediately). You should then receive a confirmation for your records. This should be kept for future tax purposes.
Hopefully, at this point, you and your broker will discuss future stock purchases and other investments. It is a good idea to build a plan for your financial future, which is why it is important that you have a good relationship with your stockbroker. Although you do not want a pushy, over-reaching broker, you do want to hear from them on a fairly regular basis. If they are not contacting you with opportunities or just to check in on occasion, then you probably are not receiving all of the benefits that a paid broker has to offer.
How to Start Buying Stock
Buying stock in publicly held companies is a traditional investment opportunity that can result in handsome rewards and fun. Those who have never played the market may view the prospect of buying stocks intimidating. To help get started use these tips for how to start buying stock.
Prospective investors should get some practice before buying any stock. Several good online stock market simulators allow users to try their hands at investing with virtual money before they put any real money on the line. Some simulators have contests that make investing and learning entertaining and challenging. Simulators feel like trading with an online broker, so they are great places to test strategies. Also, online trading advice and stock research tools help new investors learn how to pick stocks, how to place orders, and how to track their investments.
Selecting an online stock broker is the next step to start buying stocks. Many people recognize the names of the largest brokers from television advertisements, but the new investor should carefully shop around because other good brokers out there do not advertise on TV. Before signing up with a broker, investors should research them to make sure the one they choose has a good reputation.
Important points to look for when choosing a broker include minimum opening balance and trade commission. Many new investors have a lot of money to invest, so minimum opening balances do not concern them. Typical online brokers require balances that can vary from $0 to $1,000 or more to open an account. Those who have a small amount to invest probably want to choose a broker with a low opening balance requirement.
Investors also shop brokers by their trade commissions. Brokers charge these fees every time an investor buys stocks or sells stocks. Compared with live traders, almost all online brokers have low commissions. Broker commissions vary a lot so investors should shop around. Large investors may not care if trade costs $15 or $7, but those with only a small amount to invest will probably benefit from brokers that charge smaller commissions.
Research takes time but usually pays off. Rather than buying the first stock that shows up in their spam email, investors know what to look for in a stock. If not, they might want to return to the stock simulator to learn before risking money. Investors should also consider using one of the many stock investment strategies endorsed by a major financial newspaper. Those proven systems keep investors away from scams while guiding them with solid market principles.
The fun and the scary part are buying stock for the first time. Investors who did their research can log into their broker and fill out their first order. Now investors must wait. New investors often get jittery, especially if their first stock plummets after they buy it. A few days of losses can easily reverse over a few days of gains. Investors must have patience or else they will quickly accept losses on stocks that end up performing well over time.
