How To Buy Stocks: Step-By-Step Guide For Newbie

Buying stocks is not as difficult as it seems, but there is a need to do some research and learn the secrets before making the first move. Stocks play an important role in your investment portfolio; therefore, knowing how to buy stocks is very important.

However, buying stocks involve having a brokerage account that can be set up in less than 15 minutes. After setting up the account, add money to the account, follow the step-by-step guide to find, choose, and invest in the company of your choice. 

The whole process might look cumbersome initially but the process is straightforward. The following are the step-by-step guides in knowing how to buy stocks.

• Choose an online stockbroker
• Get adequate information on the stocks you wish to buy
• Choose the number of shares to buy
• Decide on the order type of your stock
• Optimization of the stock portfolio

Choose An Online Stockbroker

Engaging the services of an online stock broker is the best way of buying stocks. Once you are through with account opening and funding, you can buy stocks via the broker’s website in a few minutes. Also, one could buy stocks from the company directly or make use of a full-service stockbroker.

Getting an online brokerage account is as easy as opening a bank account. Supply the necessary details, provide a means of identification, and decide if you want to fund the account by electronically funding the account or by mailing a check.

The following are the best selected online stockbroker;

Get Adequate Information On The Stocks You Wish To Buy

After opening a brokerage account and proper funding is done, you are now ready to pick the stock to buy. Start your research from the companies you are already familiar with. Ensure that you do not allow real-time trade figures overwhelm you as you carry out your research, don’t forget that you are in search of a company that you want to be part of the owners.

You need to critically look at the company’s annual report – both management and shareholders reports. Other tools for evaluating the business are available on the firm’s website. Some of these tools are quarterly earnings, SEC filings, conference call transcripts, and other recent updates.   

Interestingly, many online brokers offer guidelines on how to make use of their tools and seminars on how to choose the best stocks.

Choose The Number Of Shares To Buy

There should be no form of pressure on the number of stocks to buy. However, it is recommended to start small – that is, going for a single share to have a feel of what it takes to own a share and to know if you have the strength to go through the challenges. You can add to your portfolio as you have a firm grip on the shareholder’s secrets.

It is also possible for a newbie to choose fractional shares. This means that there is an opportunity to buy a portion of a stock and not the full share. With this, you can acquire pricey stocks from companies such as Amazon and Google that offer four-figure share prices.

The stockbrokers that offer fractional shares are Charles Schwab, Robinhood, and SoFi Active Investing. Also, many brokerage firms offer tools that can directly convert the dollar amount into shares. If for example, you have $700 – you can know the number of shares that amount can buy for you.

Decide On The Order Type Of Your Stock

It is important to be aware of some word combinations on your broker’s online order page. The following are a few of them;

Bid – For sellers: it is the amount at which buyers want to buy the stock

Ask – For buyers: it is the amount at which sellers are willing to collect for the stock

Market order – This is a request to quickly sell or buy a stock at the best-offered price

Spread – This is the difference between the highest bid amount and the least ask amount

Limit order – This is a request made to sell or buy a stock ONLY at a certain price or more

Stop order – This happens when a stock gets to a certain price, the “stop price” a market order is initiated and the order is executed at the prevailing price

Stop-limit order – Upon reaching the stop price, the trade is converted into a limit order and it’s filled to the point where price limit can be agreed on.

Optimization Of The Stock Portfolio

It is believed that your first experience in buying stocks would translate into a successful investment journey. However, it’s possible things do not turn out the way it’s been anticipated – know that every investor goes through some difficult patches at times.

Therefore, ensure to concentrate on things you have control over and keep your perspective.

So, in optimizing your stock portfolio;

Try investing in mutual funds. These funds make it possible for you to buy several stocks at a go (one transaction). Check online to find out the best brokers for mutual funds.

Be on the lookout for the brokerage fee. This if not properly checked can eat-up your returns on investment.

You cannot be a successful shareholder if you do not have the right tools for the job. Also, you can check online to find the best stockbrokers which can assist you to pick the best brokerage account. 

In conclusion, a lot of learning, re-learning, and monitoring are needed before embarking on buying stocks. Take classes on securities, investment, and other relevant aspects from different accredited firms.

Do a test-run by selecting some stocks and monitoring their daily movements and how they affect your returns. You could get an advisor who will help with crash training on how to buy stocks because the basic thing that is needed is adequate knowledge to make an informed decision.