Multiple Ways to Buy a Stock

Of course, the answer is never so cut and dry. There are indeed multiple routes you can go if you decide that investing in the market is something you want to do. Traditionally the process was done by forming a relationship with a stock broker. You would then have to either visit or call your broker every time you decided you either wanted to buy new stock, or sell existing stock.

The process is a bit more refined now, as it can be done from the comfort of your own home. Although there is still the option of heading over to the local stock broker’s office, you can very simply open up an online trading account, and buy and sell stock using nothing more than your computer and the internet. A fantastic invention, I must admit! No longer any need to head to the broker if you don’t want to, especially as there is no shortage of people online who will profess to teach you how to buy stocks.

A Few Stock Buying Resources

If I may, let me give you a couple of suggestions that just might help you out. My first suggestion might not apply to everyone, but if you know someone who has been buying stock for a number of years, and has had reasonable success doing so, take advantage of that valuable resource. Try to ask a question or two, act interested. The smallest tip from someone like this might be exactly what you need to get you on your way.

You might also try to read a book or two. Whether you go to your local library and pick up a few stock trading books, or you head to eBay or Amazon to see what kind of a screaming deal you can get on the latest stock-based paper back, your question of how to buy stocks in only a click away.

And speaking of a click away, don’t forget the internet of course. There are countless websites on the world wide web that are designed for the exact purpose of teaching people how to buy stocks. You might start with a simple search on your favorite search engine, and then see where that takes.

One Final Suggestion

If you’ll allow me, I’d like to give you one last tip. Most online brokers will allow you to open what is basically an account with fake money and do what is called ‘paper-trading’. You will open an account with say $50,000, and buy and sell stocks as if it were real money. With this approach however, you are able to get a good feel for how you really buy stocks and what you can expect in regards to daily volatility, swings you might see in regards to profit and loss. Try as best you can to treat it as if it were real money, then when you feel you are ready, take what you have learned and apply it to the real world of buying stocks online.

1. Before you decide on buying stocks, you must already have an idea of what you are interested in. Do research first. You should choose your stocks with care as the stock market may crash anytime. Look for a stable company so that you can be assured that your money will not be relatively safe.

2. Engage the services of a broker. Brokers are more knowledgeable on how to buy stocks. You have three choices when it comes to brokers: Full service brokers, Discount brokers and Online brokers. Actually, they are all the same. They only differ from each other in terms of the price they charge and the advice that they provide. Full Service brokers charge you by getting a portion or a commission; a certain percentage of your purchase. Discount brokers charge US$10 to US$20 for every trade of 1,000 shares or less. On the average, discount brokers charge an amount that is 1/3 of that of Full service brokers. Online brokers charge US$9 to US$15 for every transaction.

3. Be ready for some technical terms or jargon that the brokers may ask you. Since they know how to buy stocks very well, you should anticipate questions like “Market or limit order?” and “Day only or good ‘till cancelled?” So to translate: when placing an order to your broker, if you choose a market order, you are saying that you want to purchase a stock regardless of whatever happens to the prevailing price of that stock. A limit order on the other hand lets you set a specific price that you are able and willing to pay. Your order will be automatically filled once the stock dips down to that level. Limit orders can either be for one day only or indefinitely or good until it is cancelled.

4. After buying a stock, you can tell your broker to sell it if the price goes down to a certain level that you have specified. This is also known as stop loss order which can be likened to an insurance since you’ll never lose more than the amount you specified no matter what happens to the price of the stock.

Ultimately, knowing how to buy stocks will not save you from losing money. Considering the state of America’s economy today, you should think twice before deciding on buying a stock from a certain company. Most companies are closing nowadays, laying off workers and declaring bankruptcy. There are still some companies that still stand strong despite the economic crisis. But the bottom line is, are you willing to gamble in these tough economic times?

Before I proceed any further on discussing how to buy stocks, it is important to know first what a stock is. In finance and business, a stock indicates ownership in a corporation. Most corporations sell shares of stocks to the public so that they can raise money to finance their operations. So when you buy stocks, you are actually buying an ownership position in that corporation. As an example, if a certain corporation has 2000 shares of outstanding stocks and you buy 50 of them, then you have purchased 2.5% ownership in that corporation.

Now that you have a basic understanding of what a stock is, it is also imperative to know the different types of stock that companies offer. The widely known are the penny stocks and the blue chip. In general, the corporations represented by the blue chip stocks are considered to be financially stable, so most investors usually choose to invest in this type of stock.

With all these stock basics in mind, you now have to decide if you will seek external help on how to buy stocks or to do it on your own. In the first scenario, if you choose to purchase stocks through a broker, you must be ready to pay commissions and fees. This is the best route for you if you feel uncomfortable in dealing with stocks directly. However, if you are reluctant in getting a broker, you can inquire directly to the corporation your interested in if they have a direct stock purchase plan. This will save you the money as you will not incur any fees this way. If the corporation you’re eyeing does not have the plan that will allow you to purchase stocks directly, they may offer a dividend reinvestment plan (DRIP). If you want to use this plan to buy stocks, then you must own at least a 1% share of the company.

Another wise strategy on how to buy stocks is to spread your stock purchases. This is especially advisable for beginners because if all your stock purchases are concentrated in just one company, your chances of losing are also greater. However, if you distribute your stock purchases, your earning investment can compensate the ones that earn less.

With the financial situation in such dire straits, knowing how to buy stocks is no longer a luxury for first time investors, it is a necessity.