How to Invest in the Stock Market
Thanks to technological improvements and financial innovations, it’s easier than ever for individuals to invest in the stock market. In this article, you’ll learn how to easily open an online brokerage account, then start investing right away!
Compare Brokerage Accounts
The most common way to buy company shares is by setting up an online brokerage account, which will allow you to easily invest in the stock market. You don’t need to go through a human broker, which is the way that stocks were traditionally bought and sought. Many banks offer existing customers brokerage accounts, or you can go with an online provider like E-Trade. Be sure to compare several different options and read all the fine print so that you aren’t surprised by any trading fees, which may vary according to factors such as volumes purchased or sold.
Open a Brokerage Account
Once you have decided which brokerage account you would like to open, you will need to send in the required documentation and also set up a payment system to fund your purchases. Note that many brokerage accounts require a minimum amount of funds you need to initially transfer when you set up the account. Some common payment systems include using a check or linking the brokerage account to your checking account.
Research Which Stocks You Would Like to Buy
The next step is to carefully think about which stocks you would like to buy. It’s important to thoroughly research the companies you are thinking of investing in, as buying a share is a sign that you have faith in the firm’s growth potential and the way it’s being managed. Another thing to think about is how to diversify your portfolio, which is one of the fundamental principles of investing. In other words, “don’t put all your eggs in one basket” when it comes to investing in the stock market. After establishing which stocks you would like to buy, and how many shares of each company, it’s time for the fun part—placing an order.
Put in an Order
There are two major order types: market orders and limit orders. Market orders simply refer to buying orders that will be executed at the current market price. Because, however, some stocks can change prices very quickly, the final price executed may differ slightly from the last price quote provided. Limit orders, meanwhile, afford you slightly more control. You provide the broker with a price quote, and the “buy” order is executed when the stock hits that price in the market.
An Option for Investing in the Stock Market Without Opening a Brokerage Account
It’s also possible in certain cases to purchase stocks directly, without opening a brokerage account. One way to do this is through an employee Direct Stock Purchase Plan (DSPP). A key advantage of a DSPP is that the fees are much lower than with a brokerage account. It’s possible that in some cases you pay no fees at all. Not all companies, however, offer this option to their employees.