When you’ve discovered a company that appears to be a good investment, it’s time to take out the wallet and buy some shares. Identifying a good stock and buying it are two entirely different tasks, however, so there are a few steps you’ll need to accomplish before you own a piece of your dream company. Buying stocks is a fairly straight-forward process, and once you’ve purchased your first shares, you’ll be well on your way to becoming a stock market veteran.
Find the ticker symbol. Public companies are identified by a symbol that is between one and five letters long. (reference 1, ticker) To find your favorite company’s ticker symbol, visit the corporate website and search for an investor information page. The ticker symbol should be listed along with other interesting material for investors such as recent earnings and annual reports. Alternately, use a well-known financial website and find the ticker symbol by using the search function. You should find not only the ticker symbol, but also public financial information on the company.
Open a brokerage account. If you want to research, purchase, and track future investments on your own, a discount or online brokerage might be in order. This type of brokerage account will save you money on trading costs. If you’d rather have a professional help you with future investments, a full-service brokerage firm may make sense because you’ll be paired with a broker to help you make purchase and sale decisions. Ask friends for recommendations of good brokers or advisors. Before deciding to hire a broker, check their track record and experience on the Financial Industry Regulatory Authority BrokerCheck website.
Fund the account. Either write a check, deposit in-person, or wire funds into your brokerage account. It may take a few days for the funds to be available for trading. The money earns a nominal interest rate until you decide to place a trade. If you’re in a hurry to buy today, ask about a credit account that will allow you to purchase using the brokerage house’s money at a low interest rate until your funds arrive. Although most will deny this request, it doesn’t hurt to ask.
Decide when to buy. You’ll want to find out from financial websites when earnings are expected and also look for any purchases or sales made recently by management insiders. Although neither of these will give you a definite buy or sell signal, review how the stock responded recently to earnings or insider trades. Finally, review a chart of recent trading activity and the volume chart often found below the price history graph. Avoid purchasing immediately after huge spikes or plummets in the stock price or volume of trades until you’ve scoured the Internet for information on what could have caused the discrepancy.
Place your order. To purchase quickly, place a market order that buys the stock at the current price tag. If you’re worried about fluctuation in the stock and want to avoid overpaying for the issue, choose a limit order. This type of order allows you to predetermine a price point. Once the stock price falls to your target, a market order is triggered, purchasing the stock. Obviously, if the stock never lowers to your target the stock will never be purchased.