Investing for Beginners
6 Steps To Buying Stocks
The first time I bought any shares of a company I was terrified. I had no idea what I was doing and if I was doing it right. Believe it or not, it’s not painful and it’s very easy to do.
I use Scottrade, so my steps are more geared toward their service, but its similar for most places.
Step 1:
Log into your brokerage’s web site and click buy. Scottrade’s option is on the left side. Be sure you have enough money deposited into your account. If you do not, deposit the money and proceed to step 2.
Step 2:
Enter the stock ticker symbol. (Example: GE is General Electric and PG is Proctor and Gamble)
Step 3:
Enter the number of shares you are buying. To find this number you take the amount you are investing divided by the current share amount.
$1,000 (amount invested) / $10.00 (the current share price) = 100 shares.
Be sure to leave a little extra available for the commission and price changes.
Step 4:
Market vs. Limit
The “Market” options buys the stock at the current price or close to it when you click buy.
The “Limit” option allows you to enter how much you are willing to pay for the stock.
I used to use a limit on all my buys until I figured out that I was wasting more time chasing a stock within pennies of where I wanted to buy. I now only use the “market” option. Those few penny changes doesn’t worry me as much. If I was trading millions (I wish), it would be different.
Step 5:
Click Review/Buy (wording may vary by service).
Step 6:
Celebrate! You bought stocks and are on your way to accomplishing your financial goals!
Happy Trading!
Paper Trading – Testing the waters for sharks
Don’t risk your money on untested strategies. You will get bitten by the Wall Street sharks. I always test my new strategies on paper for a month. Its fantasy stock trading!
Here are the rules:
1. Pick your dollar amount. Be realistic. If you aren’t trading in the millions, don’t do it on paper. $500 is a good starting point.
2. Write down your rules and stick with them.
3. Your buy amount is the closing amount of the day you buy. Write down the date and amount.
4. When you sell, it’s the closing amount on the day you sell. Write this down as well.
5. After a month check your profit/loss. How did you do?
By doing this, you can decide if the strategy has merit or is a dud! Its better to find this out before you risk money. This is good for short term trading. If you are in the process of saving money (Part 1 – How much money do you need? Investing for only $50 a month) then use this to get more familiar with the market (long term or short term). You can modify the rules a bit to try day trading, but it’s more extreme.
Got a new rule to add, a question to ask or simply want to comment please do so below. I love comments, it brings joy to blogging!
Beginning Investing – Part 3 – Choosing an investing style based on your goals
If you are new to this site you may want to start with part 1 of this series. If you are a returning reader, Welcome Back!
By now you should have created a plan to save money for investing and have several goals in mind. Today it’s time to consider what style of trading you will need to reach your goals.
Long Term Goals (10+ years)
For big long term goals like purchasing a home, you will need a long term investing strategy. Invest in value stocks or any investment that pays a dividend.
Strategies include:
⁃ Dividend paying stocks – usually Big Cap stocks
⁃ Value Investing
⁃ ETF’s
⁃ Mutual Funds
⁃ Index Funds
It’s best to reinvest any dividends paid. Remember, you want less risk with these goals.
Intermediate Goals (5-10 years)
These are goals such as luxury vacations (Paris, Kentucky* in spring?), luxury car**, or any big ticket “want”. The item tends to have the word luxury associated with it.
Strategies include:
⁃ Value stocks
⁃ Small-Cap
⁃ Growth Stocks
Look for companies that are growing their business or good companies whose stocks are undervalued. Your goal is to create a portfolio of stocks you can cash in for a nice profit in the next 5-10 years. You’ll take on more risk for greater reward.
Short Term Goals (1 day – 5 years)
Short term trading is the riskiest, but with the high risk comes a larger reward. Your goal in short term trading is to buy and sell in a short period. You may keep a stock a day or over a year depending on your strategy.
Strategies include:
⁃ Day Trading
⁃ Swing Trading
⁃ Value Stocks
⁃ Penny Stocks
⁃ and many more…
BIG WARNING: SOME OF THESE STRATEGIES WILL LOSE MONEY. Short term trading is VERY risky!
Subscribe to the RSS or return to this site for more information on stock strategies.
* Yes, there is a Paris, Kentucky. Fun fact, the first winery in the United States was in Kentucky. Oddly, it’s not related to Paris, Ky.
** or pickup if that is your thing
Investing for Beginners – Part 2 – Why are you investing? Have a goal in mind!
If you already have the money, great job! If not, keep saving and don’t get discouraged.
Your next step is to decide on your investing goals. Having an investment goal is important. What good is investing if there isn’t a reward for doing good. After choosing a specific goal, I found that I was more interested and made better decisions based on my goals. Your goals will also determine your investment style. Short term goals for short term investing and long term goals for long term investing. Don’t worry, it’s OK to have several goals. Just don’t pick too many, unless you have the cash to cover all of them.
Here are a few examples:
Pay off car (that’s one of my goals)
Retirement
Buy luxury vehicle
Buy a home
College
Luxury items (big TV, gadgets or other nice wants)
Big vacation – Is there somewhere you would really like to visit? Like the Fried Chicken Festival in Corbin, KY (not making this up and I want to go!).
Quit job – It would be nice to be independently wealthy. This one is hard, but possible.
Warning:
I tried investing for money and it didn’t work out well for me. Just being rich is a nice goal, but harder to obtain without the details to get you there.
Action Time:
Name one or two goals with a reasonable deadline. Write them down or create a goal board with pictures of what you want to achieve. This will keep you on track and interested.
Now that you have your goals, you can decide on your strategy and style of investing.
Here is how I put this into practice:
I’m hoping to pay off my new van early. I’m shooting at short term investing. I add a little extra money every month to my initial investing and shoot for small quick profits every week (swing trading – more on that later). This also keeps me focused on what financial books and resources to use.
Related Posts:
Investing for Beginners – Part 1 – How much money do you need? Investing for only $50 a Month!
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Investing for Beginners – Part 1 – How much money do you need?
Investing for only $50 a Month!
$50 a month seems a bit extreme and I’m going to make it even more so. You can do this even if you make minimum wage! It’s true dear investor, keep reading!
I took the dive in early 2008 and started investing. I will admit I almost drowned a few times and the Wall Street sharks took a huge bite out of me, but I kept swimming. If you don’t have a small fortune or a sickly rich relative that has you in their will (Not counting the emails about the unknown rich relative in some unknown country), you’ll need to start out small.
How much do you need? It comes down to what you can afford. Can you take 5% of your monthly income and not miss it?
Example:
Minimum wage is $7.25
If you work 40 hours, you make roughly $1,100 a month. Of course dear Uncle Sam gets a cut and there are always the living taxes (state, local, school, road, oxygen, and just being alive taxes). So for example purposes, let’s say you are lucky and make $900 a month (did I say lucky?).
5% of $900 is (drum roll please) $45. For this example, we are going to round up to $50.
Now that you have committed (or need to be) this money to investing, here is the hard part (at least for me). Don’t spend it. Put it in a saving account or hide it in a jar (I did).
Tip: How to save money without knowing you are saving? Start a free checking account or savings account. Create an automatic deposit from your checking account in to this new account on the day you get paid (most online banking can do this). Don’t touch the money and don’t track it. You are hiding this secret money from you and everyone else. It’ll be there when you really need it.
In 10 months you are ready to go. It seems to be a long time, but trust me it can go by fast. To help it along, stick any extra money you acquire in the account/jar. Every little bit helps. Don’t worry if you take the whole 10 months, there are still plenty of things left to do. Like:
* Educating yourself on the stock market (subscribe to my rss and check back often)
* Choosing your strategy (What a coincidence, that’s a future post!)
* Deciding how much time you need/want to spend (you guessed it, there is a post for that too!)
Subscribe to the RSS or check back! Comments are always welcome!
