How To Buy Stocks

It can be intimidating the first time you decide you are going to take the plunge and finally learn how to buy stocks. Hopefully with a little bit of advice you can feel more comfortable during the process. The first thing you need to determine is what kind of stocks you are going to buy? Are you going to buy mutual funds or bonds sometime in the future? Why are you buying stocks? Is it to buy and hold the stocks over time for some long term goal like retirement, or are you trying to make some trades for some quick cash. How many trades are you looking to make in a month? All these are questions you need to consider when you are preparing to open an account.

Are You Prepared To Buy Stocks?

After years in the financial industry I have learned certain things must be in place before investing in the stock market. A person willing to invest in equities must have a stable financial position before they invest and realize that stocks can be risky. That is why it is important to have sound finances, such as having three to six months of expenses set aside in savings as an emergency fund, and keeping debts low to free up cash flow for investing. It is hard to be objective and invest soundly in stocks when the rest of your financial life is in complete chaos. So make sure your house is in order before you decide to invest.

Practice Makes Perfect

Before you choose a broker and begin to invest with real money it may be a good idea to practice using a technique called paper trading. Paper trading means taking imaginary money and buying stocks with it and tracking them to see how they perform. Then you can get some idea of what to expect when you start trading with real money. My favorite website for paper trading is called http://www.wallstreetsurvivor.com. There are many out there, I just really like the community tools and advice they can offer beginners just starting out in the trading process.

Select Your Level Of Service For Your Broker

There are three general levels of service that most people classify brokers into when they are looking to invest in the stock market.

Full Service Broker: A full service broker is usually the most expensive, but not a bad choice for someone just starting out. They will usually provide you with advice and research you can use to assist you in buying your first stocks. When you are starting out it may not be a bad idea to have someone you can call and consult with before decisions with your money.

Discount Broker: A discount broker is usually not as expensive as the full service broker, but they will probably not provide you with much research or assistance in selecting which stocks you should buy. This may be an excellent option for someone who knows what they want to buy, but may need someone who can help them navigate amd execute their orders. There is usually at least people you can talk to shoudl something go wrong and you need assistance in making or unwinding your trades.

On-Line Broker: An on-line broker is usually the least expensive option, but be warned, you are on your own. If you have some experience trading and know the ins and outs of the market and what you are doing, this is probably the option for you. You may not need the face to face or customer assistance, just the platform to execute your trades.

Get Ready To Trade

Once you have selected your broker and made your initial deposit to fund the account you should be ready to go. If you did your research, practiced by paper trading, and selected the right kind of broker based on your experience level, there is no reason why you can't have a rewarding experience trading stocks. Just remember, there are people who are considered geniuses who do nothing but trade stocks all day, and even they can have a miserable track record sometimes depending on the year. So try to limit your downside risk and always remember to remain humble and keep an open mind on what you are trying to accomplish, it can be extremely rewarding done right.

Good luck with your trades!

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