How to Buy Stocks: 5 Steps to Success

Buying stocks can seem daunting if you don’t know what you’re doing. Don’t worry though, it’s actually fairly simple. Follow these five tips to learn how to buy stocks.

1. Open a brokerage account

This is possibly the most important step when buying stocks. If you’re buying stocks online, choose an online brokerage that you can operate very comfortably. Clearly understand any fees and conditions associated with the site. Some sites require you to invest a minimum amount; others do not. They may charge a flat rate, or they could charge per transaction. Some websites offer advanced selections like options and limit orders. If these are important to you, make sure that the site you choose has such availability. Also, verify the fees associated with these special selections. You need to clearly understand how to operate the site that you will use. Check the Top Investment Apps 2020.

2. Pick your stocks

When choosing stocks, look at their trend in the short, medium, and long-terms. If they steadily increase in the long-term, that’s a good sign that you’re looking at a strong stock. A little fluctuation is normal. Also, watch how the stocks have performed over the last several months. If a stock is in a slump, is there a reason? How does the stock perform against other stocks in the sector? Does it perform above the market? Look for stocks with a strong positive trend that performs well when compared to the market and to other stocks in the sector.

3. Decide the number of shares to purchase

Once you select a brokerage, determine your budget. How much money do you have to invest in stocks? Make sure that you’re comfortable with the amount that you choose, and stick to it. While it can be very tempting to invest large amounts of funds in stocks, you need to understand that stocks are very risky. Never invest more money than you are comfortable losing. Prepare for the worst, even though it’s unlikely to happen.

4. Choose the right order type

Which order type is right for you? Are you interested in a basic market order, or do you want to invest in more complicated stocks? If you think that you will want the choice of limit orders, stop-loss orders, etc., in the future, make sure that your investment broker provides these options. Always make sure that you thoroughly understand the type of stock that you are dealing with before making a purchase. Buying stocks that you do not understand is a good way to lose a lot of money very quickly. However, if you do understand more complicated stock options, using them can be a huge advantage to your overall portfolio.

5. Manage and optimize your portfolio

Focus on finding a broker that is the best fit for you. Choose a broker that has low fees, yet offers the services and options that are most important to you. For example, look at the cost per transaction. Is there a flat management fee, or is it based on the worth of the account? If it is percentage-based, this could drastically increase in the future, reducing the overall profit on your account.

Remember, no single piece of data can guarantee your success when buying stocks. However, a balanced portfolio and careful market consideration can set the odds in your favor.

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