If you want to earn higher returns on your money, you can accomplish this goal by investing in the stock market. Here’s what you need to know about purchasing stock as a beginner investor.
Open an Affordable Trading Account
Before you can buy stock, you’ll have to open an investment account. It’s simple to open an investment account; you can do so online or in-person at a financial institution that offers brokerage accounts. You’ll need to fill out an account application, have some type of identification and have a means of funding the account, as stated by NerdWallet.
The minimum amount required to open an investment account varies significantly among different financial institutions. Some brokerage firms may waive the minimum balance requirement if you complete regular trades.
Decide if you want assistance with your investments or if you’re comfortable trading, buying and selling on your own. A discount broker is suitable for most beginning investors. If you want help, look for a full-service brokerage account.
Research Different Types of Stock
You’ll have the option to choose from an assortment of stock funds. Purchasing individual shares of stock allows you to invest in a specific company, but this also carries a relatively high level of risk.
An exchange-traded fund (EFT) enables you to invest in multiple companies with a single share of stock. It’s similar to an index fund, but index funds tend to have higher commission costs for trading the shares. You’re invested in multiple companies and this reduces your risk. If one company performs poorly, there’s still the chance that the other companies will perform favorably.
A mutual fund also consists of shares from multiple companies, but it’s managed by a professional adviser, as stated by the Motley Fool. Since it’s managed by a professional adviser, it tends to have higher fees than an index fund or EFT.
Check Out the Fees for Potential Stocks
Before purchasing an individual stock or fund, make sure that you understand and research all of the fees. You might have to pay a fee for purchasing the stock, and the fund may also charge an annual fee. Some funds also charge a fee when you trade or sell your shares. Funds managed by an adviser typically have a management fee.
Decide How Many Shares You Want to Purchase
Once you’ve decided what stocks you want to invest in, you need to decide how many shares you want to buy. You may prefer to start small with a single share until you determine exactly how adverse you are to risk and how you’ll react to fluctuations in the market.
Place a Buy Order for Your Stock
Placing a buy order for your stock is the last step to becoming a shareholder. Go to your investment account, and select the stock you want to purchase. Specify how many shares you want to buy. You should also decide if you want to input any parameters on the price.
It’s possible to purchase the stock at the current available market price. Or you can place a limit order that doesn’t put the purchase through until the stock hits a certain price.