Buying shares and stock is a little like riding a bike. It seems like a big deal before you try, but once you’ve begun, you wonder why you waited so long. Stock ownership is an exciting way to invest that can not only be profitable, but can also help people learn how different companies operate. Whether your goal is an education, riches or just to begin funding your retirement, there are a few basic steps you should know before purchasing your first share of stock.
Write down your goals to help you decide which stocks will fit best. The National Endowment for Financial Education recommends making sure your goals are actionable, have a set time frame and are reasonable. Once you know your goals, it’ll be easier to eliminate the many stock choices that don’t match your investment objections when buying shares and stock.
Sign up for a brokerage account to buy your shares. If you aren’t comfortable picking stocks and making your own trades, you may prefer a full service brokerage. You’ll be paired with an investment professional who has licenses to help people make suitable choices for investments. Because some brokers and advisors are better than others, ask friends for recommendations and use the Financial Industry Regulatory Authority (FINRA) BrokerCheck website (see Resources) to check your broker’s experience and track record.
Use a discount or online brokerage account if you’re capable of performing your own research, personally executing trades and monitoring the portfolio alone. You’ll save some money this way because online and discount brokers generally charge lower fees to trade than full-service brokers. Visit a few different websites to compare fees, services and trading tools before settling on one.
Research many different companies before deciding what you want to purchase. Long-time investment pro Peter Lynch recommends starting your search with companies that you admire and use their services or purchase their products. From there, use websites such as Yahoo! Finance, ETrade Clearstation or MarketWatch Bigcharts to review company profits and revenue; read news about product offerings and management statements and track charts that show historical trends in the share price.
Execute your trades once you’ve decided on a few stocks whose shares you’d like to buy. Decide whether you’d like to use a market order or limit order to make your purchase. Market orders purchase shares immediately at the best price available. You use a limit order to make sure you don’t overpay by specifying a price limit that won’t trigger an actual trade until your target price is reached.
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.