How to Invest in Stocks and Shares

Investing in stocks and shares for the first time is like buying a new house. Although it will become comfortable and easy later, deciding exactly what to buy and how to arrange your portfolio is a new, exciting experience. Don’t let the stock market cable television programs fool you into thinking that you’ll never know all the nuances of stock trading. By focusing initially on the basics, you can learn some of the technical information later. Investing in stocks and shares isn’t difficult if you follow a few simple tips.

Discuss your goals with family members and write them down. Everyone who will be affected should be part of a session discussing goals and prioritizing opportunities. The National Endowment for Financial Education advocates starting an investment strategy by creating reasonable goals with specific time frames in clear, concise terms. This will help you separate out stocks and shares that don’t help you meet your objectives.

Open a brokerage account. The type of account you open is based on your time available for research and stock picking. If you prefer to dig for new stock and share investments alone, look toward online brokerage firms to save on trading commission fees. If you’d like the help of a broker or adviser, ask friends for recommendations of full-service providers you can interview. Although you’ll pay more, someone will help you pick suitable stocks for your goals. Investigate the broker’s compliance record on the Financial Industry Regulatory Authority website before hiring anyone.

Track companies that interest you on a watch list. A common thread among successful investors such as Peter Lynch and Warren Buffett is that they invest in companies they know thoroughly rather than in less familiar investments they think are going to be “hot.” List companies that you admire on a sheet of paper. Find out if each has publicly traded shares by using a popular financial website such as Yahoo! Finance or MSN Money. Type the name of the company in the quotes box to retrieve information on the stock.

Research your favorite companies. Ask your broker for research on each company if using a full-service brokerage firm. If using online resources, refer again to sites such as Yahoo! Finance or MSN Money. Both of these sites have robust research tools that allow you to compare year-over-year revenues and profits, management changes and product news. Check the charts of each company to review recent price trends. Although none of these individual actions will give you a firm signal to buy a stock, you’ll become much more familiar with the company stock shares.

Buy some shares of stock. Use a market order to jump into the stock immediately. Your market order triggers as soon as possible at the best price currently on the market. If you’re worried about overpaying for a stock, try a limit order. This allows you to place a target below the current trading price, so that if the price drops, an order will trigger as soon as your target is reached. If the stock never lowers to your predetermined price, your limit order will never execute.

Tip

  • If you'd like to practice investing without risking money, first try one of the many online stock trading games available. You'll be able to test your trading skills in real time without risking the family fortune on your stock picks.

About the Author

As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.