One of the primary methods for investing in your future is purchasing stock. However, many people are confounded by it. The math intimidates them and the risk of financial loss scares them away. Nothing is as intimidating as it seems and with risk comes great reward, especially with money. It’s about research and taking the first step.
First steps for buying stock
Save your pennies- Purchasing stock is an investment in a business. With investment in any business, there’s a risk of financial loss. Some financial experts advise stock newbies save 2-3 months worth of income prior to investing.
Research and more research- Whether you hire a stock broker or go it alone, learning as much as you can about the companies and the types of stock that you want to buy is critical.
Brokerage or Online
There are three routes people take when purchasing a stock. The key difference in each option is the money you want to spend versus the effort that you want to put out.
Using a Broker- Brokers charge a commission based on a percentage of your stock purchase price. While you can make the purchase yourself, brokers are helpful to newbies because of their knowledge of the market and the stock-buying process.
Hiring a Discount Broker- Discount brokers work the same way but at a cheaper price. They also offer less help.
Online Broker- You may buy stock online for $9 to $15 a trade. It’s a good option if you are knowledgeable about the stock market.
Tips for Buying Stock
Market or limit order- When purchasing a stock at market value you are buying it at the prevailing price of the day.
In a limit order situation, you can set the amount of stock you would like to purchase at a specific price. If the stock dips down to that level, your order will be automatically filled.
Day only or Good ’till’ cancelled- Limit orders can be left open for a single day (“day only” order) or indefinitely (“good until canceled”).
If you use a broker, they can be instructed to sell your stock; if the price drops to a level you specify (a stop loss order). This action can guard you against taking a major loss. However, this move is tricky in a volatile market because losses may be temporary and not a part of a larger trend.