Monday, February 3, 2014

Basics: Investing In Stocks


Read this if: 

1) You want to start investing in individual stocks but you don’t know how. 

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I’ve read a lot about how people got rich because they picked the right stock at the right time. It all sounds very attractive, but there is significantly more risk involved in stock trading (than, say, investing in mutual funds). For those of you who want to try it, here’s a guide to the basics of stock trading.

Where To Start

You will need what’s called a “brokerage account.” Think of it as a place where you tell people what you want to buy and sell, and when you want to do it. 

How To Pick A Brokerage Firm 

If you’re a beginner, then the most important things are: 

1) Low minimums: You don’t want a firm that requires you to put in $5000 just to open an account. There are accounts that don’t even have a minimum, or have a really low one. 
2) Low fees: Some firms charge, for example, $9.99 per trade, meaning every time you buy shares of a stock, they take some money. You want to minimize this. 
3) No account maintenance fee. 

Most companies offer all of this information in a clear way, like in a table that summarizes all their fees (example here, and read more about fees in general, too). 

Picking Stocks

There are many schools of thought on how to pick stocks, which I’ll save for another post. In general though, it boils down to picking companies that you think will be around in 10, 20, or even 50 years (and be doing well at that time). 

How Much To Buy

This of course depends on how much money you have, but keep in mind that you have to buy "whole" shares of a stock. 

If a stock costs $500 per share, and you really want to invest in it but you can only put in $30, then you can buy "partial" shares by pooling your money with other people, much like a mutual fund. 

What To Do After You Buy 

Some people trade every day or every hour, and others buy shares and hold them for years, or even decades. It’s up to you what you want to do. 

Bottom Line

Keep in mind this is just a brief introduction! There are textbooks and essays written on the art of investing in stocks. The simplest thing to do is to buy and hold. I encourage you to figure out what you’re personally comfortable with! 

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What companies do you think will be around in 50 years? Let me know in the comments. 

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As always, contact me with questions or suggestions! 

Comment on the post or email me at moneymattersjoan@gmail.com!
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Photo Credit: David Paul Ohmer via photopin cc

3 comments:

  1. Joan, did you read the chapter in that Silver book they gave all of us on the stock market? If not, I think you would find it interesting

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  2. Tim, what Silver book? Who is "they?" Who is "us?" I know not of what you speak.

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  3. Ooooh, I wasn't in your class haha. But thanks for the suggestion, I"ll check it out!

    ReplyDelete