How To Invest For Beginners: Buying Stocks
The world of buying stock can be confusing, especially if you are a beginner who hasn’t purchased stocks either online or through a broker. We all see shows on TV or hear about some couple that spent $500 to buy penny stocks that shot through the roof and turned them in to millionaires overnight. The truth is investing doesn’t work like that. In fact investing is nothing like that.
Buying and selling stocks requires a lot of research, planning and most of all patience. Many of us think you can get a tip on some hot stock to buy and strike it rich, but if you really want to make money buying stocks you need to learn how to do research and buy the RIGHT stocks that give you an appropriate return, and account for your desired risk level. This article will help take you through the steps
Part of the reason that online investing for beginners seems so tricky is that most beginning investors don’t know how to get started investing. Many people are intimidated at the sheer number of investment options out there while others are worried about waking up the next morning, checking out their stock quotes and finding out that they lost everything. Well the good news for those worried about the latter, if you do your investment research right you won’t have to worry about that, at least not most of the time.
First Steps To Investing
The first steps to investing if you want to get out there and buy stock is to sign up for an account with a big name online stock broker. There are a lot of very large reputable dealers out there that you can sign up with quickly and easily so I won’t re-hash that in this article, a quick search should give you a list of a dozen or so.
When choosing an online stock broker, one of the first things you will want to look for is the price of commission that they charge. Brokers make their money by buying and selling stocks on your behalf and charging you a fee for the transaction. Some brokers charge as little as a couple dollars while others can charge hundreds. The amount of the commission usually corresponds with the level of service the broker is providing.
Usually brokers that charge hundreds or thousands for each trade deal with large stock purchases and do much of the research and planning for you. On the flipped side companies that charge a couple of dollars per trade will often give you access to stock quotes, and give you some research tools to use, but largely all of the legwork in researching the stocks you want to buy falls in your lap. These are the drawbacks to working with a discount broker as opposed to a large full service broker.
In addition to the commissions charged for each purchase and sale of stock, you will want to take particular note of any account fees that may be charged. Some companies may charge a fee for minimum balance, a monthly maintenance fee, or even a fee if you don’t place enough trades over time. Fees vary by broker and should be contained in the literature you receive when signing up for the account. If the list of fees are vague or not given to you, you should seek another broker that will provide more clairity on their fee structure.
What Stocks To Buy
Another place where beginner investors get tripped up is on what stocks to buy right off the bat. Sometimes deciding on which stocks to buy can be as simple as having a hunch or a hot stock tip, but generally speaking this isn’t a good strategy for the long term. The good news is there are a few tips you can take to figure out which stocks are right for you.
The biggest factor that you need to determine the risk level you are willing to take on. There are a lot of factors that will help you determine this, like how close you are to retirement, how much money you have to spend and quite frankly how much stomach you have for risky stocks.
If you have a very low risk tolerance then you should buy only blue chip stocks. Blue chips are stocks that have been around a long time and have stood the test of time. They are companies that anyone would know, big companies that have a history of good profits and won’t be closing their doors anytime soon barring a financial implosion of epic proportions. If you have an extremely low risk tolerance then you shouldn’t invest in stocks at all, but more likely in a bond fund or a very diversified mutual fund.
Ultimately the decision on whether or not to buy stocks and what kind of stocks to invest in lies with the individual. Buying stocks isn’t for everyone, but over time stocks have outperformed every other investment security option so it is definitely worth considering.
© How To Invest For Beginners: Buying Stocks
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