How to Buy Stock
Choosing the proper stock and buying it can be a difficult process. The stock you purchase and the brokerage firm you use to do it should be a reflection of your investing goals and budget. You will want to screen out the stocks and brokers which do not meet these goals and then compare the specifics of those which remain. Regarding individual stocks, after researching things like earnings, price and so on, it does not take long to choose a stock and subsequently buy it with the help of a broker.
Many people filter out stocks which they think are poor or which do not match their investing goals by creating stock screens. You must know your investing goals to create such a screen, however. Do you want the potential for rapid growth, even if it means buying a riskier stock? Do you want long-term growth? You cannot eliminate stocks without knowing your long-term goals. Once you figure out your goals, create a list of criteria you want in your stock. This list should include things like earnings, price, dividends, past performance and so on.
Then, eliminate all of the stocks which do not meet your search criteria. There are lots of tremendous websites available which allow you to compare stocks side-by-side, providing you with knowledge regarding which stocks are best for you. Look through the financial statements when viewing a company profile. Check their earnings growth and stability, as well as tax records. When companies receive a tax break, they often see a short-term bump in earnings. This can be a sign to perform a quick buy-and-sell with that particular stock. Also check the number of outstanding common shares. In general, more shares mean a lower price-per-share. It is not necessarily bad if a company issues more shares, but be sure to research the reasons behind why they would make such a move.
Look at a company's debt, cash, and asset ratio, all of which can be found on the balance sheet. Steer clear of companies with long-term debt, but do the opposite with those who have a lot of cash. Cash statements can be inflated if the company recently sold a bunch of new stock because their earnings for those sales are located in the cash section of the balance sheet. Lastly, look at the asset ratio. This is the ratio of assets to liabilities, and as you might expect, the higher the better.
When actually purchasing the stock you have decided upon, you will want to go through a stock broker. There is no law that says you must do this, but using a stock broker is the way to get the best stock prices. Stock brokers have access to up-to-the-second stock prices, which is essential if you plan to trade stocks daily. Using a stock broker also allows you to deal with one person, as opposed to buying stock directly from companies and being forced to deal with all of them individually.
To get started, open an account with a brokerage firm. There are three types of firms available, from most expensive to least expensive: full-service brokers, discount brokers and online brokers. Full-service brokers research stocks for you and contact you with suggestions. Discount brokers provide you with information on stocks, but it will be up to you to decide upon which stocks are right for you. Online brokers simply provide you with an avenue through which you can purchase stocks. The broker you choose should depend on your experience level and budget. Full-service brokers usually take a commission on each trade, discount brokers typically charge between $10 and $20 for a trade, and online brokers charge up to $15 per trade.
No matter which broker you choose, you will be asked to sign an agreement, so be sure to read this as closely as possible. When you want to actually buy or sell a stock, you can almost always do that online. Log in to your account with your brokerage firm and start slowly, purchasing a mutual fund or other low-risk proposition. You can set all kinds of criteria when you purchase a stock. You can instruct the broker to sell it at a certain price, for example, and this is called a limit order. You can also instruct the broker to buy or sell at whatever price the share happens to be at, which is called a market order.
