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How do i buy a stock?

Buying stocks can be an intimidating process, so let's learn some tips you should apply when purchasing stocks. 

The most important step to starting off in the stock market it to understand what a stock is and how it works. A stock is a share in ownership of a company. The buyer (you) will receive a share of a company in exchange for money. If you own company stock, that means that you actually own a percentage of the company itself. 

Once you have a better understanding of stocks and how they change in value, you may be ready to actually purchase the stock. 

You buy and sell stocks in the stock market on a "stock exchange". There are three major US exchanges: NYSE (New York Stock Exchange), NASDAQ (National Association of Securities Dealers), and the AMEX (American Stock Exchange). These exchanges provide place where buyers and sellers can buy and sell shares. 

Steps To Buying Stocks: 

1. No Commercial Debt

The first step to buying a stock for the personal investing, is to make sure that you have eliminated all of your commercial debt. This is a key step. There is no reason to purchase a company if you have any outstanding debt (credit card, student loans, line of credit or any high interest debt product). Given that your debt is likely more expensive than your potential return on your investments, you should consider putting that money towards paying off your debt first.

2. Choose an Online broker

Do your research. There are countless options that offer many different pricing and packages. You should spend as much time researching the actual broker as the stock itself. Some questions to keep in mind in your research process: What are my goals? Are these short term or longer term investments? What is the cost and trade fees of this account? What are the tax implications? Any minimum deposit requirement? Then, familiarize yourself with the online brokerage site and make sure your are comfortable with all of it's features.

 

3. Deposit $ into your brokerage account

You will most likely need to transfer money into this account from your checking account. Note if there is a minimum deposit requirement.  

4. Types of Orders

Understand that there are different order type options available to investors. The simplest order type is a "market order" which purchases the stock at the current bid/ ask price. Additional order types include a limit order, stop order, etc. 

5. Place the Trade

The stock market is open Monday - Friday 9:30am to 4:00pm Eastern Time and during that time, you are eligible to buy and sell stocks. When you execute the trade, make sure that you note the price at which the stock was purchased.

6. Keep an eye on it

Definitely watch how your stock performs, but no need to everyday. If it loses value, do not panic. Stock prices are constantly changing every second the market is open. The most important thing to do here is to not get emotional about your investment. Money is made in the market by investing, not trading. Let the stock market (which is designed to reward good investments) work for you.