How To Get Started Investing In Stocks
OPEN UP A BROKERAGE ACCOUNT:
The first step in buying a stock is to open up and fund a brokerage account. This is a simple process! You simply fill out a new application and fund your account. It’s similar to opening up a new bank account.
First, however, make sure you compare the costs and services of each brokerage firm. An individual needs to decide whether to use a discount online brokerage firm or a full-service firm. Many individuals save money by investing online and use brokerage firms like E-Trade or Robin Hood. Most of the brokerage firms charge no commissions today to buy (or sell) your stocks, ETF’s or options. So there has never been a better time to open up an account and begin investing!
Once your brokerage account is opened, and you have thoroughly researched your company, then you are ready to buy stock in the company. This is an exciting time for many investors! The decision now is which buy (or sell) order should you place.
MARKET AND LIMIT ORDERS:
There are many different ways an investor can buy (or sell) their stocks. This article will address both market and limit orders. Investors can place a market order or a limit order with their brokerage firm. Investors should educate themselves on all types of orders and use each one to their advantage.
The first and simplest way to buy (or sell) stocks is the market order. This order must be placed within normal market hours: 9:30 a.m. to 4:00 p.m. Due to modern technology, once executed the order will be placed immediately.
For instance, if you were buying your stock a market order would inform your broker to buy at the current “asking” price. For example, if you purchase a share at $14.25 your order should be executed at approximately the same price, or; very close to it. The price you end up paying may be $14.15 or $14.35. This type of order is very self-explanatory.
The next type of buy (or sell) order is the limit order. With the limit order, you, the investor, names the price you are willing to buy (or sell) your stock for. You will need to specify whether a limit order is a “day order,” “60 days” or a “good-till-canceled” order. A day order ends at the end of the trading day. If the stock price reaches your set price during the time frame you designate the order “automatically” goes through!
A good-till-canceled order can remain open until the conditions you specify are met. In other words, a GTC order might go through, or might not ever happen. The investor does have the option to cancel limit orders at any time.
You can save a little money by using limit orders because the price of stocks fluctuates continuously. Limit orders allow you to buy, or sell, your shares at a “fair” price. An example would be for a stock to be selling at $27.00 per share, however, you only wanted to buy it at $25.00 per share. So, you would place a limit buy order for only $25.00. If the share drops to $25.00 your limit order goes through and you have saved yourself some money.
Limit orders are great, also, for keeping your emotions in check! For instance, when buying a company’s stock you decide up-front the “maximum” price you are willing to pay for the company’s stock! You then forget about the order until the stock hits your buy price.
Just make sure you have adequate funds in your brokerage account in case the buy transaction automatically goes through. You don’t want a stock to reach your buy limit and there isn’t enough money in your account to cover it! Limit orders are great and give the investor some control over what they are willing to pay for a stock and, also, what they are willing to sell their stocks for.
Limit orders, also, “free” the investor from waiting for the right time to buy (or sell) their stocks. Keep in mind, though, that limit orders may, or; may not execute dependent upon the conditions the investor specifies.
In conclusion, with brokerage firms charging no fees to buy and sell stocks, there has never been a better time to get started investing! It is easy to open up a brokerage account and begin investing. In addition, the investor should be familiar with the different types of orders they can place. Market orders are the simplest way to purchase (or, sell) stocks and orders are executed within normal market hours. An investor can also use limit orders whenever they buy (or, sell) their stocks. Limit orders are great and can take some of the pressure off the investor! With limit orders, an investor may save money on their purchases of stocks and also make money on their sales of stocks!
