How do I Invest in Stock Step-by-Step?
Your first stock purchase can be an exhilarating experience. Suddenly you're the owner of a share of a company, and your financial success will depend on the success of the company and other traders' view of the operation. To be a successful investor, you'll want to do your homework before making a trade. Experienced traders don't pick a stock and press the "buy" button. There are a series of steps they follow to give them a better chance of success when completing a stock transaction.
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Instructions
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Define your goal. You'll avoid investing in the wrong type of investment by first defining your goal. Stocks work best for long-term goals, and large companies are less volatile than small companies. If you want to be aggressive, explore smaller firms. If you want to be conservative, large, stable companies are a better option. If you need money soon to pay debt, it may make sense to use a different type of investment than stock altogether.
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Explore areas you already know for good stock picks. Financial guru Peter Lynch, in his book "Beat the Street," warns investors against purchasing the hot area of the stock market they know nothing about. He recommends instead researching stock in companies that you are more familiar with.
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Review the fundamentals of a company. Using either your broker's website or one of the many free financial sites available, look for healthy, successful companies by digging into financial information. Review a company's earnings growth and revenue growth. Look for low debt and decreasing inventory.
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Look at a company's stock chart to become familiar with its historical price movement. If a company recently experienced a large spike in price or volume of shares sold, there may be important news you should investigate before investing, such as a change in management, new product news or industry concerns that could affect that company and its stock price in the future.
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Open a brokerage account, if you haven't already got one. You'll need a place to trade your shares. If you're comfortable choosing your own companies and placing your own trades, an online broker may save you some money. If you aren't comfortable working alone, ask friends for names of good financial advisers and brokers in your area to interview and begin a relationship.
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Use the company's ticker symbol to place your trade. Either call in the trade to your broker or use an online trading platform to purchase stock. You buy stock in shares, and many investors purchase several at a time.
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Choose either a market or limit order. A market order purchases shares at the next available price, quickly filling your order. A limit order may not fill immediately, because you specify a price that will trigger the trade to occur. This allows you to avoid overpaying for a stock because of a large spike in the price just before you place your trade.
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