Knowing how to buy stocks online can be a handy knowledge if you are thinking about investing (and managing) your money and assets. In the old days, buying stocks could only happen through the traditional and offline systems. But now, everything has changed, thanks to technology. Most people have gone online since the era of the internet because it is faster and more efficient.
How to Buy Stocks Online – Basic Facts You Need to Understand
Before you learn about how to buy stocks online, you need to have a brokerage account first. Opening one is quite easy – you only need around 15 minutes to create one, top. A brokerage account is the account that users access when they want to buy or sell securities, such as mutual funds, bonds, and stocks. Simply transfer money into your (brokerage) account and you can get access directly to the stock market (and other types of investments). What if you want to withdraw your money? Again, you only need to transfer out money from the brokerage account to your bank account. No fuss and no drama!
Brokerage firms allow investors like you to open the brokerage account online. You don’t have to have any deposit in most brokerage firms, but you do need to have enough funds within the account before you can buy any investment. The broker is responsible for holding your account and acting as the intermediary – between the investments (you want to buy) and you. There isn’t any limit to how much money you can deposit within your brokerage account or how many brokerage accounts you can have within a brokerage firm. And you should know that opening a brokerage account is completely free. But again, you need to deposit money or fund your account before buying anything.
Knowing how to buy stocks online isn’t difficult or complicated, really, but it would be helpful if you know the proper steps to do so. Knowing the right stages will be helpful to manage your funds safe and sound – and you won’t have to worry that you will lose your money either.
Choosing an Online Stockbroker
Online stockbroker would be your best way to buy stocks online – and it’s also the easiest. You need to open and fund the account through the site. You can also buy the stocks directly or use a full-service brokerage.
Perform a Research
When you want to buy stocks, you need to know the company’s profile first. Which one are you interested in? Keep one thing in mind so it would be simple: You want to choose a company in which you want to become a (part) owner – not because you want the price to increase. This would make the search easier because there are so many different market gyrations and data that would overwhelm you.
Another step in how to buy stocks online is to do extensive research over the company that you are interested in. start up with its annual report, focusing on the annual letter from the management to the shareholders. This particular letter would give you ideas of what’s going on with the business and also numbers within the report.
After you have done your research, you can go to the broker’s site and find the (analytical) tools for business evaluation, including recent news, quarterly earning updates, conference call transcripts, and also SEC filings. If you don’t know how to use these tools, no need to worry because most brokers would offer tutorials on how to use the tools or choose the stocks.
Decide the Numbers
How many shares do you want to buy? This is another step in knowing how to buy stocks online. You aren’t forced or required to buy a certain number – even the broker can’t make you do so. If you are new to this, you want to start small – and slowly. Many stock experts suggest buying quite small (just a single share) and get the feeling of having your individual stock. As you master your way through the investment, you can add small over time.
You probably want to consider fractional shares – it’s a new type of investment enabling you to buy a (portion of) stock instead of the full share type. With this type of investment, you can have the expensive stocks (like Amazon or Google) with smaller investment. Charles Schwab, Robinhood, and SoFi Active Investing are some example brokers offering fractional shares.
Many brokerages also offer tools that can convert dollar to shares. This kind of tool is handy when you have a particular amount to invest. For instance, you have around $500 to invest and you are wondering how many stocks or shares you can get for that amount of money.
Choose the Stock Order Type
The next step in knowing how to buy stocks online is to choose your order type. In general, there are only 2 types of order: the market order and limit order. Although there are so many different and seemingly fancy terms in this business, don’t be discouraged. You can learn these terms as you progress.
In this type, you show an indication that you want to buy or sell (the stocks) at the best current price. This one doesn’t have price parameters, so the orders would be fully filled or executed immediately. If you choose this type of market, don’t be surprised by the price. You probably have the quoted price higher (or lower, or vice versa) and the price you will have to pay (or get) isn’t similar to the quoted price. It’s because the ask and bid prices are constantly changing and fluctuating. This type of order is great for buying stocks that don’t have (wide) price swings. This is more suitable for blue-chip stocks that are steady and stable from big companies – contrary to the more volatile and smaller companies.
In this type of order, you gain control over the trading price. Let’s say that the A stock is being traded at around $50 per share. You think that the price should be around $45 on how you value the company. With limit order, you ‘tell’ the broker to hold. The broker is allowed to buy if the price drops to the price you set – if not, then the broker isn’t allowed to buy it. And in case you already buy the share for $45, and you believe that it is worth $55, you also tell your broker to hold on it and don’t sell it if the price is still below $55. The broker can sell the share if it has reached at least $55 from your set price.
Optimize the Stock Portfolio
You can wade your way through investment and build up portfolios. But you also need to remember that things aren’t always easy. World investors like Warren Buffett also has gone through difficult times and rough patches – investment isn’t always a win. The key is to focus on things you are able to control and to keep the perspective intact. Always have backup plans and NEVER spend all of your assets within a particular stock, no matter how lucrative or profitable it is.
If you are already familiar with stock purchases, how about other types of investments? Are you interested in mutual funds? Have you set a retirement account like IRA to ensure your future finance? Although having a brokerage account (and buying stocks) is great, it’s just a start of your journey with investment.
The world of investment in stocks or bonds may seem confusing, but you should be able to get the hang of it once you have interacted with it. It would also be a good idea if you have done your research in the brokerage firms. Choose the one that has good portfolio and reputation. Don’t just think of profit and benefit – you want to manage and handle your assets, not only pursuing profits. Now that you already understand the basic of how to buy stocks online, are you ready to make an investment?