Diving into the business of buying and selling stocks can be overwhelming on multiple levels. In an era where almost all parts of the world are connected to the internet, one does not need to visit a brokerage firm or make a call to be able to buy a stock. The entire process can be completed in a matter of minutes on a touch of a button at home. The following are the basics of how to buy a stock
Open A Brokerage Account
Opening a brokerage account is usually the first step to owning a stock of any publicly traded company. Opening a brokerage account is as easy as opening up a bank account as the entire process can be completed online. The main requirements for opening a brokerage account includes providing valid documents ascertaining proof of identification and proof of residence. Some firms also require one to ascertain how they intend to fund their account, either by mailing a check or transferring cash electronically. When it comes to selecting a broker, it is important to consider how much money one intends to invest. Some brokers have a minimum amount requirement that one must have to buy and sell stocks. It is also important to consider how much support may be needed as different brokerage firms come with educational tools for investment and guidance.
Select a stock
Once a brokerage account has been opened and funded, selecting a stock is usually the next step. Research is a must for anyone who is serious about generating a significant return from the stock market. Carrying out research on companies one might have had a personal experience as a consumer, may act as a good start for novice traders. Company’s annual report act as a good foundation when one wants to know how a stock is likely to perform, given what is happening in the business.
Decide How Many Shares You Can Buy
The total amount of shares one can own in a company is mostly determined by the amount of capital one is willing to invest. However, that does not mean that one stock should be allowed to fill one’s entire portfolio. Starting small is the best way to get a good feel of the market at reduced risk. By purchasing the minimum amount of shares that a brokerage firm allows, one should be able to experience the ups and downs synonymous with the stock market. You can add your position over time as you master the art of trading stocks.
Choose Order Type
Brokerage firms allow traders to buy and sell stocks by placing either a market order or a limit order. A marker order is whereby a trader is offered a stock at prevailing market price. Market orders are usually executed immediately with slight variations in price. Market orders are the best for people whom small differences in prices is not important.
Limit Order allows one to buy a stock at a specific price rather than prevailing market price. For example, if a stock is trading at $60, one can place a limit order to buy it at $50. The order will be executed once the stock drops to the $50 mark.