How to Buy Stocks – How to Buy Stocks for Beginners

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Do you want to know how to buy stocks? If you want to, then there is no problem as many users like you also find it very tough. I was once like that until I finally discovered how and also some other important information too.

How to Buy Stocks

So all you have to do now is to read further and then get or grab all the necessary information as soon as possible. Keep on reading.

How to Buy Stocks

To buy stocks, you will first need a brokerage account, which you can easily set up in about 15 minutes. Then, once you have added money to the account, you can now follow the steps below to find, select, and even invest in individual companies.

How to Buy Stocks for Beginners

It might seem daunting or simply seem confusing at first, but buying stocks is really very straightforward. Here are some steps to help you understand how to buy stocks:

  • Select an Online Stockbroker

The easiest way you can then use to buy stocks is through an online stockbroker. After opening and then funding your account, you can now buy stocks through the broker’s website in a matter of minutes. Other options can then include using a full-service stockbroker or simply buying stock directly from the company.

Opening an online brokerage account is also as easy as setting up a bank account: You can complete an account application online; just provide proof of identification and choose whether you want to fund the account by mailing a check or transferring funds electronically.

  • Research the Stocks You Want To Buy

Once you have set up and funded your brokerage account, it’s time to then dive into the business of picking stocks. A good place for you to start is by researching companies you already know from your experiences as a consumer.

Don’t let the deluge of data and even real-time market gyrations overwhelm you as you simply conduct your research. Keep the objective simple: You are looking for companies in which you want to become a part owner.

Warren Buffett famously said, “Buy into a company because you want to own it, not because you want the stock to go up.” He’s done pretty well for himself by following that rule.

Once you have identified these companies, it’s time for you to do a little research. Start with the company’s annual report — specifically management’s annual letter to the shareholders. The letter will then give you a general narrative of what’s happening with the business and even provide context for the numbers in the report.

After that, most of the information and even the analytical tools that you need to then evaluate the business will be available on your broker’s website, such as SEC filings, conference call transcripts, quarterly earnings updates, and also recent news. Most online brokers also provide tutorials on how to use their tools and also basic seminars on how to pick stocks.

  • Decide how many shares to buy.

You should then feel absolutely no pressure to simply buy a certain number of shares or simply fill your entire portfolio with a stock all at once. Consider starting with paper trading, using a stock market simulator, to get your feet wet. With paper trading, you can even learn how to buy and sell stock using play money. Or if you are ready to put real money down, you can then start small—really small.

You could also purchase just a single share to then get a feel for what it’s like to own individual stocks and also whether you have the fortitude to then ride through the rough patches with minimal sleep loss. You can also add to your position over time as you master the art of shareholder swagger.

New stock investors might then also want to consider fractional shares, a relatively new offering from online brokers that simply allows you to buy a portion of a stock rather than the full share. What that means is that you can then get into pricey stocks with even a much smaller investment. SoFi Active Investing, Robinhood, and Charles Schwab are among the brokers that offer fractional shares.

Many brokerages simply offer a tool that then converts dollar amounts to shares, too. This can even be helpful if you have a set amount you would like to invest — say, $500 — and want to know how many shares of that amount you could buy.

  • Choose your stock order type

Do not be put off by all those numbers and even nonsensical word combinations on your broker’s online order page. Refer to this cheat sheet of basic stock-trading terms:

Term

Definition

Ask

For buyers: the price that sellers are willing to accept for the stock.

Bid

For sellers, the price that buyers are willing to pay for the stock.

Spread

The difference between the highest bid price and the lowest ask price.

market order

A request to buy or sell a stock ASAP at the best available price.

Limit order

A request to buy or sell a stock only at a specific price or better.

Stop (or stop-loss) order

Once a stock reaches a certain price, the “stop price” or “stop level,” a market order is executed and the entire order is filled at the prevailing price.

Stop-limit order

When the stop price is reached, the trade turns into a limit order and is filled up to the point where specified price limits can be met.

There are also a lot more fancy trading moves and even more complex order types. So do not bother right now—or maybe ever. Investors can even then build successful careers buying stocks solely with two order types: market orders and also limit orders.

Market orders

With a market order, you are then simply indicating that you will buy or sell the stock at the best available current market price. Because a market order simply puts no price parameters on the trade, your order will also be executed immediately and even fully filled, unless you are then trying to buy a million shares and also attempt a takeover coup. If you try to buy a very thinly traded stock with low volume, the market order may not be fulfilled.

Do not be surprised if the price you pay—or receive if you sell—does not match the price you were quoted just seconds before. Bid and ask prices fluctuate constantly throughout the day. That is simply why a market order is best used when buying stocks that do not experience wide price swings—large, steady blue-chip stocks as opposed to smaller, more volatile companies.

Good to know:

  • A market order is then simply best for buy-and-hold investors, for whom small differences in price are less important than ensuring that the trade is fully executed.
  • If you place a market order to trade “after hours,” when the markets have closed for the day, your order will then be placed at the prevailing price when the exchanges next open for trading.
  • Check your broker’s trade execution disclaimer. Some low-cost brokers can bundle all customer trade requests to then execute them all at once at the prevailing price, either at the end of the trading day or even a specific time or day of the week.
Limit orders

A limit order can give you more control over the price at which your trade is simply executed. If XYZ stock is then trading at $100 a share and you also think a $95 per-share price is more in line with how you value the company, your limit order tells your broker to hold tight and then execute your order only when the asking price drops to that level. On the selling side, a limit order tells your broker to simply part with the shares once the bid rises to the level you set.

Limit orders are also a good tool for investors buying and even selling smaller company stocks, which then tend to experience wider spreads, depending on investor activity. They are also good for investing during periods of short-term stock market volatility or even when a stock’s price is more important than order fulfillment.

There are additional conditions you can then place on a limit order to simply control how long the order will remain open. An “all or none” (AON) order will be executed only when all the shares you wish to trade are available at your price limit.

A “good for day” (GFD) order will also expire at the end of the trading day, even if the order has not been fully filled. A “good till canceled” (GTC) order remains in play until the customer pulls the plug or the order expires; that is anywhere from 60 to 120 days or more.

Good to know:

  • While a limit order guarantees the price you will get if the order is executed, there’s no guarantee that the order will be filled fully, partially, or even at all. Limit orders are also placed on a first-come, first-served basis, and also only after market orders are filled, and even only if the stock stays within your set parameters long enough for the broker to execute the trade.
  • Limit orders can also cost investors more in commissions than market orders. A limit order that cannot be executed in full at one time or during a single trading day might then continue to be filled over subsequent days, with transaction costs simply charged each day a trade is made. If the stock never reaches the level of your limit order by the time it expires, the trade will not be executed.
  • Optimize Your Stock Portfolio.

We hope that your first stock purchase marks the beginning of a lifelong journey of successful investing. But if things turn difficult, remember that every investor—even Warren Buffett—goes through rough patches. The key to your coming out ahead in the long term is to simply keep your perspective and also concentrate on the things that you can control. Market gyrations are not among them. But there are a few things in your control.

Once you are familiar with the stock purchasing process, take the time to dig into other areas of the investment world. How will mutual funds then play a part in your investment story? In addition to a brokerage account, have you ever set up a retirement account, such as an IRA? Opening a brokerage account and even buying stocks is a great first step, but it is really just the beginning of your investment journey.

FAQs

How Many Shares Should I Buy?

The number of shares that you buy simply depends on the dollar amount you want to invest in. If the share price is $50 and you have $500 you are willing to invest, you could purchase 10 shares. However, if your brokerage does not allow fractional trading and the numbers are not that clean, you will have to round down. If the stock price is $50 and you have an amount of $500 to invest, you will only be able to purchase nine shares, as 10 shares would cost $510.

What Are Some Cheap Stocks To Buy Now?

It is very important to note that the price of a stock does not tell you everything you need to know about a company you are considering investing in. The price then reflects how much investors are willing to buy or sell the stock for — not the intrinsic value of the company, nor the direction in which the company’s stock price is simply headed. Just because a stock is “cheap” does not mean that it’s a good buy.

That said, there are also ways to find stocks that might be undervalued. This strategy helps investors to simply identify proven companies with stock prices that might then be lower than the stock is worth due to external factors such as a down stock market overall.

Are Stocks and Shares the Same Thing?

For the most part, yes. Owning “stock” and owning “shares” both mean that you have ownership — or equity — in a company. Typically, you will then see “shares” used to refer to the size of an ownership stake in a specific company, while “stock” often means the equity as a whole.

For example, you might then hear investors say, “I bought 10 shares of Apple,” or “I have stock in Apple, Facebook, and also Amazon.”

How Do You Make Money in Stocks?

The primary reason that investors simply own stock is to earn a return on their investment. That return generally or simply comes in two possible ways: The stock’s price appreciates, which means it goes up. You can also then sell the stock for a profit if you would like.

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