Everybody is new at something once. And, to be frank about it, some people are never good at some things. Face it. You probably still don't give a good massage, your meatloaf tastes like cardboard and you won't be starring in a late night movie on Cinemax anytime soon. When it comes to buying stocks, you could lose quite a bit if you dive in headfirst, only to find out you're just not a very good investor. The great thing, however, is that you can test the waters with a relatively small amount of risk.
Find an online brokerage with a low minimum initial investment. A whole host of firms offer entry at $1,000 or less. Some, even big names like Charles Schwab, even waive or reduce their minimum if you agree to make automatic monthly investments from a linked checking or savings account.
Choose a brokerage that charges reasonable commissions. Every time you buy or sell a stock, you incur a commission charge. If you plan on investing small amounts of money, steep commissions can eat away at your returns. Strive for commissions lower than $10 per trade; brokerages charging these relatively low commissions are a plenty.
Open an account. Choose between an individual or joint account. You can even open your brokerage account as an IRA. You can generally execute the entire account opening process online. Most brokerages ask for the same type of information -- contact details, Social Security number, a driver's license for identification -- that banks ask for when you open a checking account.
Fund your account. Most brokerages let you do it right on the spot by transferring money from your checking or savings account. Common funding alternatives include bank wires, sending in a check (so year 2000) and transferring assets from another account. Once you money clears -- some brokerages let it happen instantly -- you're ready to conduct research and buy some stock.
- Open a practice account. Plenty of websites (see Resources) give you play money and let you manage a portfolio of stocks and other investments. Make some practice trades to see how you do and evaluate your stomach for the risk inherent in stock investing.
- Beware of brokerages with too-good-to-be-true low commissions. While they probably are true, the downside is that the outlet might be bare bones with little or no access to research, limited or no telephone customer service and no offline trading options.
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- What Is Shareholder Stock?
- What Kind of Property Is a Stock Certificate?
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- Does Stock Buyback Reduce Equity?
- The Difference Between Cash & Stock Mergers
- How Is Treasury Stock Shown on the Balance Sheet?
- Taxation of Covered Calls
- What Happens if I Have a Short Position in Shares That Do a Forward Split?
- Value Stock Vs. Growth Stock Long-Term Return