Steps To Buy Stock Online
In the simplest of terms, a stock is defined as a share of ownership in a company or corporation. Stocks normally represent a claim to the assets and earnings of that company or corporation. Whether you use the term equity, share, or stock it basically means the same thing. The more shares you purchase, the greater your ownership stake becomes. Additionally, shares of stock are represented by what is called a “stock certificate.” In reality, this is just a fancy piece of paper that proves your ownership.
When you buy stock online, they are typically classified into one of two categories:
-
Common Stocks
Where ownership is concerned, common stocks carry voting rights which can be used during the corporate decision making process.
-
Preferred Stocks
There are no voting rights involved with preferred stocks but they are entitled by law to receive a level of dividends prior to the issuance of those dividends to the numerous shareholders. Additionally, there are convertible preferred stocks. These types of stocks can be converted into common shares.
8 steps to take when ready to buy stock online
If you are just beginning in the stock market, here are 8 steps that you can take before really taking the big plunge:
-
Educate yourself
Read as much as you can about the market and the types of stocks you are looking at before you buy stock online
-
Develop your goals and strategy
Financial goals and investment strategies are critical so you should develop these according to your specific needs
-
Research individual stocks
You can do this by reading annual and/or quarterly reports as well as other documents which are on file with the SEC (Securities and Exchange Commission)
-
Invest in what you have learned
Consider local company stocks that you are familiar with and confident about
-
Check out mutual fund holdings
Mutual funds are considerably lower in risk and if they are winning with specific stocks, you could win, too
-
Diversification is the key
The best way to balance your portfolio and minimize the risk factor is to diversify your holdings and shares (never put all your eggs in one basket)
-
Find an online brokerage
If you’re confident in what you have learned and can go it alone, you will avoid paying unnecessary fees and broker’s commissions by investing through an online brokerage
-
Purchase stocks that you will hold onto for 3 to 5 years
You want to avoid being tempted to dump the stock if it drops in price because they typically rebound and gain again
Recommended online brokerages
The following is a list of 5 online brokerages that are the most commonly recommended and the most popularly used to buy stock online:
-
E*Trade
Provides access to 7 markets and 6 currencies – $7 to $10 commission fees
-
Fidelity Investments
Primarily sells IRA’s – commissions range from $8 to $20 plus $.015 per share (purchase of 1,000 shares or more)
-
Scottrade
$7 stock trades for limit equity and online market orders
-
Share Builder
Offers a variety of trading options at $10 per trade
-
TD Ameritrade
With over 100 satellite branches throughout the US, they charge $10 per trade regardless of the number of shares purchased
No comments yet.
Leave a comment
You must be logged in to post a comment.