Buying shares in a company allows you the thrilling opportunity to participate in the economy. Stock shares represent ownership of a piece of a corporation. When the company does well, so will you, as stock values rise with the fortunes of a worthwhile corporation. Conversely, when a company performs poorly, you’ll also suffer, as shares decline in value. Buying stock for the first time is a little labor-intensive, but once your account is set up, you’ll be ready to purchase shares quickly whenever you choose.
Decide on the best type of account for your share trading needs. If you plan on buying stocks solo, performing research and analysis without a professional, look toward Internet brokerage firms to save money on trading costs. If you’d rather have a broker or adviser help you choose shares to meet your goals, ask friends for names of good local full-service brokers or advisers. Before you hire anyone, check his record of complaints and license history at the Financial Industry Regulatory Authority BrokerCheck website.
Open and fund an account. Full-service brokers will point you to the correct forms to open your accounts to trade, and you’ll write a check to the brokerage firm to have funds ready for trading. For online brokers, you’ll either need to send a check, visit a local branch office or use online banking to transfer money to your new account. Your broker will have information on how to fund the account at the online site as well as phone numbers so that associates can help you.
Research your stock. Start with the company’s fundamentals by reviewing revenues and profits at popular financial sites such as Yahoo! Finance or MSN Money (see Resources). Read news about the company to find management changes, product developments, and competitor products and services. Visit the company website to read the annual report and company public relations material. Management trading activity, called insider trading, is found at these same financial websites and shows whether those closest to the company are buying or selling.
Review current price trends to make sure that you aren’t buying at the wrong time. Although experts will tell you that timing the market to trade shares at the right time is impossible, there are times that trading is dangerous to your pocket-book. Check trading volume at sites such as MarketWatch Big Charts and E*Trade ClearStation (see Resources). If high, there may be news you’ll need to uncover before placing trades. If the stock has recently risen or plummeted, dig through news to determine why. Although charts can’t tell you when to buy, you’ll understand your target stock more thoroughly.
Buy your shares. Whether your broker buys on your behalf or you’re pushing the buttons online, you’ll need to decide what order to use to purchase. Market orders buy the shares immediately. A limit order allows you to place a target price below the current trading level. If shares drop to your target an order to buy is executed immediately. Although this can help you avoid overpaying, you’ll miss out on the stock if it never drops.
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.