Well, that brokerage account is now open. You have followed their instructions on how to fund it. They gave you an account number, a user name and a password of your own choosing. You are now ready to rumble!
Many online brokerage firms now have research available to you once you are a client. Check out the Web site by seeing if it has a tab labeled, “Research.” Or, you can go to the numerous Web sites that offer free information and research on various sectors and stocks.
You might check out the Web site finance.yahoo.com for example, and when it requests a stock symbol, put one in and see what information pops up regarding that stock. There are also links on the page taking you to more detailed information should you choose to use it.
You might also check out Microsoft’s www.moneycentral.msn.com, and again put in the stock symbol or ask the site to find it for you by putting in the name of the company, and then check out all the information available.
I guarantee you there will be more information available on these Web sites than you would need to make an intelligent decision. You might want to read up on, say, the 10 most important things you need to know about a company/stock before you buy. This information is available online or through various books on investing in the library or at your local bookstore.
Other great sources of information are available on CNBC and Bloomberg Financial News cable TV channels. Watching these programs for a few hours a day will be an education in itself in how to invest and what to look for in the stock market. Don’t be put off by the terminology that you don’t understand. You can always write down words or phrases that mystify you and look them up later online or in a book you’ve purchased. Or ask someone who is further along in the investment world than you. Help is never hard to find!
So now you are online, eyeing your balance in the brokerage account and rarin’ to make a trade. You spent some time doing your research via your brokerage firm’s Web site and the Web sites mentioned above, plus asking around to those who have been buying stocks for a lot longer than you have.
You’re ready to buy.
The first thing you need to do is figure out how much the stock you want is trading for currently. You can check this by accessing the real time stock quotes of your brokerage firm. If the firm offers this benefit, you can set it up via your ISP provider so that it shows key information about specific stocks you are interested in or own: current price of the stock — in real time, not delayed 20 minutes — $ change in the price as of this trading day, % change up or down since its close yesterday, volume of shares trading and other pieces of information you would like to know. Let’s say the stock is currently trading at $25 per share. (Chances are it’s trading an uneven amount, but we’ll use this amount for convenience sake.)
Let’s say you have $1,000 in cash in your brokerage account, having deposited money into the account to open it. If you could capture that $25 price on the stock without it moving higher, you could buy 40 shares. However, that doesn’t take into account the brokerage commission, whatever it is. Let’s say it’s $10 per trade. You need to buy the number of shares that will allow you to stay under the amount you have in the account and also pay the commission, therefore, you should enter a buy order for 39 shares.
Next, you select “buy” and put in the symbol of the stock. Then you put in the number of shares you want to buy. (Be very careful that all this information is accurate and that you check “buy,” not “sell.”) Then you select the type of order you want: I recommend a market order, which means whatever the current price of the stock is when your order hits, that is the price you will pay.
However, there are some stock advisors who would say you should always put in a “limit” order, which means you assign a given price for the stock and will not pay more. You limit, in other words, the price you will pay. I think if you’re trading in thousands of shares, a limit order is essential. But for your 39 shares, it’s not that important, since the difference in a few pennies in the price of the stock doesn’t matter when you’re only buying a low number of shares.
Also, you want the order to be a “day” order, meaning the trade should go through on this market day and not carry over to the next.
You hit “place order” and usually have one more chance to change anything or exit the order. If you hit place order again, the order goes in and is execute.
You are now a stock owner!!
Next time we will figure out what to do with that stock you own, how to oversee and manage it.