How to Buy Shares of Stock in a Company
Buying shares in a company is not a difficult process, but there are a few things you will need to get started. First, get an on-line brokerage account and consider a few things before you trust a company with your money. Then you will need to figure out what type of order you want to use in order to purchase your stock. Finally, you will learn one of the most important things about investing and that's using a stop loss.
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Instructions
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Set up an online brokerage account. There are a few things that you should consider before you open one. First how often will you be placing trades? If you just want to buy a few stocks and sit on them for years then the commission fees that you pay should not be a big concern since most on-line brokers charge between $5 to $15 per 100 shares traded. Companies like ETrade, Ameritrade and Scott Trade have been around for quite some time and will usually suffice. The minimum amount to open an account with these companies is generally about $500 as of 2009. However, if you plan on placing a few trades a month or more then you would want to look into a discount broker such as Interactive broker or Trade Station. These companies cater to the more experienced traders and so require more money to open an account, usually in the range of about $5,000 as of 2009. Make sure that your broker is a member of FINRA or SIPC, these are the financial industry regulatory authority and the security investor protection corporation. These are the organizations that regulate brokerage firms. However, especially these days the stability of many companies are in question, so be sure to check into a their financial record before placing your money with them.
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Consider what company you wish to purchase shares in. Each company will have a ticker symbol, which usually consists of between two and four letters. So for example Coke's symbol is KO, Hershey is HSY and Wal-Mart is WMT. Once you've decided which stock to buy, you just have to type in the ticker symbol into your broker's software along with the number of shares you are interested in purchasing and at what price. You will also need to tell the software whether you would like to use a limit order or a market order. The difference between the two is simple. A limit order will only execute the trade at a specific price. So if you wanted to purchase a stock for $50, the software would only execute the trade if the stock is trading at $50 or less. However if you used a market order, the broker will buy the stock at whatever price the stock is currently selling at. If the market is particularly volatile, your trade may be executed at a bad price, so generally a limit order is the best option to use.
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Never overlook using a stop loss. This is an order to sell the stock if it goes below a certain price. For example, if you purchased the stock at $50 and you set a stop loss at $45, the broker will automatically sell the stock at this price or lower, thus saving you from losing more money. This is one of the most important things to remember in investing and sadly one of the things that is most overlooked by new investors.
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Tips & Warnings
Always trade with a stop loss Trade with a plan and know when to take your profits. Have a good reason for buying a stock.
Never use money that you can't afford to lose, such as rent money.
