It’s really a simple process, but there are things you should know as you dive into the market.
It’s as easy as setting up a bank account. Complete an application and choose how you want to fund your stock account. You can mail a check or transfer funds electronically.
You’ll be wise to find a broker to guide you through the maze. If you have to pay a little more at a brokerage that provides high-quality service, do so, especially if you are starting out with little knowledge of the market and how things are done.
Things to consider:
How much money you have for investing. Many online brokers have minimum requirements. How frequently do you plan to trade? Again, different brokers, different rules. Commissions on stock trades range from $5 to 10. Low commission costs are most attractive to investors who expect to place 10 or more trades per month. If you are an infrequent trader, choose a broker who charges inactivity fees.
Consider how much support you will need. You can choose a level of support that accords with how much you know on your own and how much conversation you need – personal telephone conversation, email correspondence, online chats or face-to-face.
Nerdwallet, OptionsHouse and Ameritrade have lists of the best online stock brokers to help you make a choice.
Once your fund is set up, you can start picking stocks. Begin with researching companies with which you are familiar as a consumer. Don’t allow yourself to get bogged down in the daily deluge of market information. Your objective is to find the companies in which you want to become a part owner. Don’t let the anticipation of a return be your only objective. A good, reliable company may pay better dividends over the long haul than a flash-in-the-pan company that is here today, gone tomorrow.
Use the company’s annual report, including the annual letter to shareholders, to get a sense of what you could expect from its stocks. Your broker’s website is the next source of information on an ongoing basis. It will post SEC filings, conference call transcripts, quarterly earnings, etc., etc.
When you feel you have settled on a good company, decide how many shares to buy. It is generally wise to start small so you get a feel for the market. You may want to purchase just one share to “practice” on. Your own ability to absorb the inevitable ups and downs the stocks normally experience may be the guideline you need to determine how far into it you want to get.
A market order indicates that you will buy or sell the stock at the best available market price. Your order will be executed immediately and fully filled if your request is reasonable. Don’t panic when you find that the stock you were buying or selling changes in value at the moment. The market is fluid, with the potential for many changes in a single day.
Be aware that your broker may bundle all customer trade requests to execute all at once at the prevailing price, either at the end of the trading day or at a special stated day or time in a week.