Investing in the stock market is not something limited solely to the ultra rich. However, buying stock can be intimidating for novice investors. While there is no “get rich, quick” method to the stock market, with proper research and sound council, learning to invest in the stock market can be a sound part of your financial plan.
Determine what your investment objectives are. Factors you should consider include how many productive years you have before retirement? What assets you wish to have upon retirement? What risks are you willing to take? And, how much money do you have available for investing in stocks?
Research the companies that you are interested in investing in. Contact Investor Relations at these companies and request an annual report. Look for the company’s financial stability, the regularity of dividend payout and whether it has a sound vision for future growth.
Establish an account with an investment brokerage firm. This can be online or at a local branch office. Many banks also have an investment advisor affiliation. Insure that you feel comfortable with the investment objectives of this firm. If you are a conservative investor, you don’t want to work with a company that is known for taking risks.
Open an account with a deep discount online brokerage firm, such as eTrade or AmeriTrade if you feel comfortable making your own investment decisions. When you open an account, you will have to deposit a minimum amount of funds. This amount varies between brokerage firms.
Select the stock you’re interested in and determine the number of shares that you wish to purchase. Shares are normally sold in 100 share blocks. Odd lots can be purchased, but you pay a premium for them. Instruct your broker to enter a “buy” order. This order can be placed “at the market,” which means the transaction will take place at whatever the current ask price of the stock is. Or you can specify a price you wish to pay for the stock. This order will only be executed if someone wishes to sell at that price. Unfulfilled orders will be canceled at the end of each business day.
Decide whether you wish to take possession of the stock certificate or have the certificates held in “street name,” which means your stock brokerage firm will hold the certificate for you. For security reasons and for convenience of selling, most investors opt for the latter.
Sell your stock by contacting your broker and instructing him to enter a “sell” order for the number of shares of stock you wish to sell. You can sell it “at the market” or specify an “ask” price. If the stock is held in street name, you don’t have to do anything else. If you have possession of the stock certificates, you will have to deliver them to your broker; your broker will instruct you what to do with them at that point.
- There are no guarantees when investing in stocks. You may lose part or all of your investment and past performance is no guarantee of future results.