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It seems like such a simple question but might be one we take for granted too often. How do you buy stocks?
We love that our readers come to Wyatt Research for all levels of stock market commentary, research and analysis.
Andy Crowder shares his expert options analysis in Options Advantage and helps investors make probabilities work in their favor. Rick Pendergraft’s discussion of chart patterns and technical analysis helps you make sense of short-term market patterns. Chris Preston’s market commentary helps you make sense of broader trends and current events affecting the stock market. Ian Wyatt and Tyler Laundon have guided their readers to huge wins with Ian’s 100k Portfolio and Tyler’s 100% Letter, not to mention the other popular newsletters they publish.
These resources are tremendously valuable to investors at many levels. Today we’re heading all the way back to the beginning. This one is for the new investors out there, those of you trying to figure out how to buy stocks and place your first trade.
How to Buy Stocks Step-by-Step
Buying stocks used to require a lot of money and a broker who charged big commissions. But times have changed and investing is now more accessible than ever.
Taking the plunge and buying your first stock can be scary. But the longer your hard earned savings sit in a low-yield savings account or CD the more you are depriving your future-self of wealth.
First, you’ll need to open a brokerage account. You’ve seen plenty of commercials for these online brokerage companies, even if you never knew what they did. (Think E*Trade’s talking baby.)
For true beginners I like the simple interface and several key features offered by ING’s Sharebuilder.com. I personally use Sharebuilder.com for my Roth IRA.
Next you’ll need to select your investment.
For the simple reason of starting with a low risk and diversified investment, I suggest your first trade involve a major market index. Risk-averse investors could start with the exchange-traded fund – ETF – that mimics the performance of the S&P 500 (NYSE: SPY).
The S&P 500 is comprised of 500 of the largest companies traded in the U.S. stock exchanges and owning it means that you own a diversified slice of the stock market.
Younger investors with a longer time-horizon or investors with a bigger appetite for risk could go for the ETF that mimics the technology-heavy Nasdaq index (Nasdaq: QQQ). Or you could go with the ETF that tracks small-cap companies – those under $2 billion in total size – the Russell 2000 ETF (NYSE: IWM).
Small-cap stocks tend to outperform large-cap and mega-cap stocks over the long term, even if they are more risky in the short term.
Finally, it’s time to place your trade. I put together this complete overview of how to place your first stock trade and I think you’ll find it to be really helpful. It explains all of the information you’ll have to fill out when placing an order for stocks.
Still nervous about getting started? There are plenty of “paper trading” or “virtual trading” platforms that let you practice investing and trading without risking a penny. You can even compete with friends or complete strangers on some of these virtual trading platforms.
Think of it like Fantasy Football for investing. Real numbers, no risk.
The important thing is this: sustainable investing isn’t about trying to buy shares in the next Google (Nasdaq: GOOGL) or Facebook (Nasdaq: FB). Sustainable investing that builds reliable wealth requires long-term thinking and patience. The sooner you start learning how to buy stocks, the more rewarding your investment career will be.
DISCLOSURE: I personally own stocks that can be found in the S&P 500, Nasdaq and Russell 2000 indices.
The One Company You’ve Never Heard of – But Smartphones Couldn’t Exist Without
Four months from now Apple will be releasing the most technologically advanced phone on the planet. And cautious estimates have them selling 200 million of them. While we love Apple (it’s in our 100k portfolio) we’re recommending a much less known company today…a company no one is talking about. A company that provides the technology, without which, smartphones couldn’t exist. It’s the company reaping massive profits each time a new Apple (or Samsung) smartphone is activated. In fact, as mobile data usage explodes in the year ahead, its stock is set to soar! Shares are already on the move. So, before this stock moves any higher, read our latest report for all the details: Click here for the full story.