Basics on Buying Stocks

Buying Stocks

You should now have the basic concept of the stock market, the exchanges that exists within it and just what it means to buy and sell a stock. Now you are probably wondering what it takes to get setup and get started buying and selling stocks yourself. Well, I am glad you asked!

Choosing a Stock Brokerage

Firstly, you will have to decide on a stock brokerage. There are quite a few online stock brokerages available. They range from the more pricey full-service brokerages with brokers who work with you to manage finances and investment to discount brokerages. Discount brokerages are much cheaper and allow you to do the research and management on your own.

A few brokerages to take a look at are:

* Fidelity.com – full service

* Zecco.com -$4.50 commission per trade

* Think or Swim – amazing desktop platform

* E*Trade

* TD Ameritrade

Your First Stock Purchase

While all of the brokerages have a somewhat unique way of letting you research stocks and enter orders to buy and sell a stock, they are all quite similar. Most brokerages will offer you rather in-depth tools to research and find your first investment.

Once you have located a worthy stock to purchase, you can lookup its quote. There are quite a few things that can appear on a full stock quote. However, the basics are: Sybmol, Last Price, Bid and Ask. For example: MSFT (Microsoft Corp.), $26.56, Bid: $26.55, Ask: $26.56. We will explain about bid and ask more later. So, all you need to know to begin is for most companies that are traded by a lot of traders throughout the day (which are most of them) the bid and ask spread is very small. In our MSFT example it is 1 cent (26.55-26.56). When this is the case and you aren’t buying 1 million dollars worth of the stock, you probably would never need to pay attention to the bid or the ask. Therefore, for the simplicity of first stock trade, let’s look at only the Last Price (which is usually somewhere between the bid and ask).

At this point you would decide how much money you wish to invest. Let us say, you want to invest about $2700 in MSFT. At it’s current market price you would be able to purchase about 100 shares. You would then enter a market order (there are other order types which we will cover later) for 100 shares of MSFT. Click “buy stock” and that should be it. Within seconds you should be the proud owner of 100 shares of MSFT.

To get a bit more in-depth will the methods of stock buying and selling, be sure the check out our next update in week.

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