Monthly Archives: October 2013

Buying Stocks: Where to Start

Before you make a beeline for your nearest stockbroker, which is undoubtedly the easiest way to get started when it comes to buying stocks, you need to know which type of stockbroker to work with. There are four general types of stockbroker, and which you choose really depends on your overall budget and how much assistance you need – but let’s assume that because you’re a beginner, you need plenty of assistance. Generally, which type of stockbroker you work with will depend on your budget and how you want to pay for the assistance, be it upfront or through your earnings.

  • Online/discount brokers: Discount brokers aren’t always found online, but what separates online/discount brokers from other brokers is that they tend not to employ certified financial brokers. Typically, they are the middle man between you and the stock market – so you use them to make orders. They’re also the cheapest way to get started, but unfortunately, they tend not to offer any investment advice. This means that you’re on your own, and unless you know at least a little bit about how online stocks and forex trading works, a discount broker might not be right for you.
  • Discount brokers with some assistance: Some discount brokers do provide some assistance, and this tends to be paid for in the form of a monthly account fee or as an upgrade from your basic discount trading account. This assistance isn’t particularly in-depth and might simply come in the form of monthly newsletters or in-house trading reports. But, if you’re a complete beginner, this might be just the advice you need to help you jump into further research.
  • Full-service brokers: Full-service brokers are your traditional stockbroker and will tell you everything you need to know about stocks, shares and trading. Chances are, you’ll get to meet with them in real life, where they’ll talk to you about your life, your finances and what you want from buying stocks. They’ll work with you to help you develop a plan according to what you can afford, what you can’t afford, what you want from stocks and how much money you want to make. The catch, of course, is that full-service brokers cost money. Accounts can be set up for around $1000 and then you’ll either have to pay a monthly fee or a fee for each deal you make, depending on the broker. If you have the budget, and if you’re a beginner, this is a really good option.
  • Money managers: Money managers are for those with a ton of money who want to pay someone else to manage their stocks and investments. Most people who use a money manager will not actually get involved with their stocks – instead, they will trust that their manager will choose the right stocks and the best yields for them. Typical accounts with money managers need to have at least $100,000-$250,000 going through them. If you earn this much money, this is definitely your best option.

Setting Up an Account

Even if you work with a full-service broker, you’ll broker some deals on your own with the advice of your broker. To do this, you’ll have to set up an online trading account.  It’s easier than you might think – all you have to do is fill out an application form with the company that your broker advises you trade through, pay money into the account and then your account will be activated. Buying stocks is even easier – all you need to do is search for the company that you wish to buy stocks in, decide how many stocks you want to buy and you’ll then be quoted a price. Typically, you’ll have up to 60 seconds to decide whether you want to go ahead with the purchase. If so, all you do is click “purchase” and the stocks will be transferred to your account.

Keep Your Head

Your broker will advise that you only buy stocks in the companies that they advise – and although it can be tempting to buy stocks that look like a good deal on the surface, because the process is so simple, it’s worth remembering that you should heed your broker’s advice. If you don’t know whether or not a certain deal is right for you, hold off on it, at least in the beginning until you’re used to trading and selling your stocks. If you’re using an online broker, make sure that you thoroughly research each deal before you go ahead and buy or sell stocks – the internet has a wealth of information out there and it’s up to you to use it so that you make the most money.

Consider Batch Broking

Batch broking, available from most brokers, is probably the easiest way to start buying stocks. Your broker will “bundle” a number of stocks and then sell them off in one batch at a certain time of the day. Generally, this brings down the cost per trade and is more guaranteed in terms of return. However, although some return is guaranteed, batch broking might mean that you don’t get the best price for your shares. However, in terms of ease, cost, and at least some guarantee on your stocks, it might be a good option for beginners.

Make Your Deals At the Right Time

Work between the hours of 9am and 4pm in the markets that you’re dealing in as this is the peak time for stock trading. Before 9am and after 4pm, trading volumes are very low, and this means that you might not get the best prices for your stocks – and you might not be able to buy them for the best prices, either. It’s really important that you make your deals at the right time, especially as a beginner, as you’ll want to make the biggest return on your investments.

Buying stocks isn’t as difficult as you might think, but you do need to have at least a little bit of background knowledge before you get started. Come back soon to learn more about stocks, trading and online trades.