How To Buy Stocks
It is a question we often hear a lot: how to buy stocks? While buying stocks sounds very easy to seasoned investors, getting started can seem challenging. However, buying stocks now is easier than ever before, because of the increasing number of discount brokers and tools that were previously only available to professionals are now available to everyone. Investing in the stock market can be very profitable, but it comes with risks. Fear not, this article features step-by-step instructions to help you get started on buying stocks.
To buy stocks, you will need:
- Bank Account
- Computer with Anti-Virus Software
Select a stockbroker. There are three ways to buy stocks: through a full-service stockbroker, through a discount stockbroker, and participate in a direct investment plan with the company (this method is rare and uncommon for small investors).
- Chose the right account for you. There are several different types of accounts a broker typically offers, but the most common ones are cash account and margin account. Cash account is highly recommended for beginners.
- Learn the language of buying stocks. Analyzing stocks is like learning a different language. For example, a search on Apple (AAPL) at MSNBC shows the following terms in regard to its finance: Beta, Dividend & Yield, Earnings/Share, Forward P/E, Market Cap., P/E, Return on Equity, and Total Shares Out. You need to know what each one of them means. You can find them easily on Investopedia.
- Pick your stocks. This is perhaps the hardest part of buying stocks. Gathering your stock ideas from the media, such as the Wall Street Journal, is a good start. You should also look into community based websites, such as the Motley Fools, for stock ideas.
- Build your own investment strategy. Find the best way to buy stocks for you. You can search stock by size of the company, by styles, and/or by sectors. Diversify your portfolio is important in order to maximize return and minimize risk.
- Keep the risk in mind. Keep in mind that buying stocks carry certain risks. If you are not willing to take such risk, maybe you should consider other methods of investing.
- Investors can minimize some risks in the portfolio through proper diversification of stocks and other alternative methods of investing, such as bonds, money market, and mutual funds.
- Risk is a natural part of buying stocks, you need to find your comfortable level in building your portfolio.