Investing in the stock market is an exciting opportunity to grow your wealth. Millions of people around the world buy and sell stocks on a daily basis. A lot more goes into this process than simply pressing buttons. It takes careful observation to know which stocks to buy and how to sell them when you are ready to make a profit. Even if you have experience, it is smart to get back to the basics so you can better understand how to create a trading strategy that works for you.
Go Through a Stockbroker
The easiest way to check on which stocks are good for purchasing is to go through a stockbroker. This is an app or website designed to show you a comparative glance at a wide variety of different stocks. All you need to do is create an account and then fund it. While you can buy stocks directly from each company, using a stockbroker is an easy way to keep all your investments in one place. If you plan on buying from more than one company, which most people do, it is important to have all of this information easily accessible so you can monitor it.
There are also full-service stockbrokers which gives you access to licensed brokers that will actually do the research for you. These individuals are trained on the best investment opportunities for your goals and budget. A full-service brokerage can also help you when it comes to retirement planning and paying taxes on your investments. They will create a personalized plan that will help you achieve your goals.
Once you have all the different stocks in front of you, it is important that you know what to look for. A general rule is that you should only buy shares when the stock is down. This is going to give you more opportunity to receive financial gain. If you buy a stock when it is on the rise, this means that a drop is inevitably going to come. It also means you will end up either breaking even or losing the money you have invested.
Take a look at the stock’s overall performance. Through a stockbroker, you will be able to take a look at past data to see how each stock typically performs. While it is not a guarantee that the stock will keep performing this way, it should give you some sort of idea on what to expect. Certain stocks fluctuate drastically daily, while others experience gradual ups and downs. If you are looking into day trading, it is especially important to choose a stock that will actually make you some money. Long-term trading gives you a bit more time to work with and allows you to let your investment sit and grow over time.
Decide on Shares and Order Type
When you purchase a stock, you are actually purchasing a percentage of the company. These are called shares, and not all shares are created equally. While you can get away with a $5 investment to purchase a share, other companies charge more for even just a percentage of one share. It is always good to strive for diversity in your investment portfolio. This means you can buy some cheaper shares along with more expensive ones to give you more of a chance to make a profit.
There should be no pressure to fill your entire portfolio with shares right away. Making good investment choices takes time and practice. Any cash assets sitting in your portfolio will not impact you in a negative way. Only make a purchase when you feel like you have a decent understanding of what to expect. This can take days or even weeks of observation on your part. If you are using a full-service stockbroker, they will make these observations for you. It is still wise to know exactly what is going on so you can ensure your money is being allocated to the right places.
The following terms are informative and will help you decide on the order type to select:
- Ask—As a buyer, this refers to how much the seller is willing to accept for the stock.
- Bid—As a seller, this refers to the price buyers are willing to pay for the stock.
- Spread—This is the difference between the highest bid price and the lowest ask price.
- Market Order—This is a request to buy or sell a stock immediately at the best price.
- Limit Order—This is a request to buy or sell a stock at a specific price or better.
- Stop/Stop-Loss Order—Once a stock reaches a certain price, this is the stop price/stop level. A market order is then filed and the order is filled at the current price.
- Stop-Limit Order—Once the stop price is reached, the trade then turns into a limit order. It is filled to a point where specific price limits can be met.
After you purchase stocks, your job is not finished. Now, you need to keep an eye on your investments. They are going to change daily, even hourly. Even if you do not plan to trade any time soon, it is still wise to know what is happening with your stocks and assets. Observing them will better familiarize you with the patterns and will help you learn what to expect. If a broker is handling your investments, it is still a good idea to keep an eye on what is going on in case you have any questions or suggestions for them. This is how you will gain valuable investment experience, all through trial and error.
Buying your first stock is a milestone in your investment journey. The experience will teach you a lot in the years and decades to come. Even when things start going south, remember that this is a normal part of the investment world—nothing is a guarantee. Values will fluctuate, and it is up to you to keep an eye on how your money is doing so you can make the largest profit possible. At the end of the day, the unpredictability of investing does not have to be a cause for stress or concern. It can actually be a lot of fun once you get the hang of it.
A trick that many big investors use is to only control what is in your hands. You are not going to be able to change the way the stocks fluctuate, but you can plan ahead in case they go up or down. Having a plan for both of these options will get you set up on the right track. You will find yourself more prepared, whether you are going to sell immediately or keep the stock for a long while.
Owning a share is like owning a fraction of the company. When you treat your investments this way, you will realize the importance of making good decisions that will benefit you and your future. Do not forget to allocate your funds properly. Once you start selling and seeing a return on your investments, you can put this money into savings accounts, retirement accounts, and other accounts that will provide you with a nice safety net to rely on.