When you purchase stock, you are buying a share in a company. You become part owner of the company, even if you only buy a single share that costs $10. Some risk is involved when you buy stocks. If the company does not do well financially, or is hit by some unforeseen calamity, you can lose most of your investment. While it is not a good idea to put all your money into stocks, they typically have a higher rate of return than bonds and many other investments.
Choosing the Stock
Before you purchase stock, you need to decide which one seems like a good investment for your needs. If you are just starting out, you might want to choose an industry or company you are familiar with so you have a better understanding of its past performance and future expectations. Look at the company's revenue and earnings. Ideally, these should be going up every quarter so you know the company is growing. Investors . Also, take a look at a company's debt. Avoid buying shares in companies that are heavily in debt. Stocks that pay dividends, or a portion of the company's profits back to stockholders, are usually a good idea. If you are new to purchasing stocks, begin by investing in companies with a solid financial track record and a stable management team.
One option when actually purchasing the stock is to enlist a broker to buy it for you. You tell him which stock to buy and how many shares you want. For example, if you want to buy 100 shares, and the stock costs $15 a share, your investment in the stock alone will be $1,500. On top of that, the broker typically gets a commission based on the price of the stock and how many shares you buy. If you are new to purchasing stocks, a broker can be very helpful. He can make recommendations about stocks and perform some research for you. He also can buy stocks based on your needs. If you are more interested in conservative, long-term gains, he can recommend stocks in that category. If you want to turn a quick profit on growth-oriented stocks, he can also make recommendations there. Using a broker to purchase stocks is more expensive than other options.
You can also purchase stocks through online brokerages. This method is usually much less expensive than hiring a broker because you pay a flat rate per trade rather than a commission. You lose the personal touch you get when you work with a broker, however, as well as the one-on-one advice on which stocks to buy. At the same time, many online brokerages contain plenty of information on the stocks you are considering buying, so you can do your research on the site. To buy stocks online, you need to create an account with the brokerage. Read all the terms and conditions through before you sign up.
Market Vs. Limit Order
Decide whether you want to make a market order or a limit order. When you make a market order, you buy the stock at the current price. For example, if the stock is selling for $45 a share, that's what you pay: $45 a share. If you decide to make a limit order, you only buy the stock when it reaches a certain price. For example, you might want to purchase the stock for $40 instead of $45. When the stock goes down to $40, your order automatically kicks in and you get it for that price.
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