There are four categories of stockbrokers that you might work with today. These are widespread, ranging from simple order-takers to sophisticated fully-fledged brokers who provide in-depth analysis service.
Before you can get started with buying stocks, you need to have an idea of what you are getting into.
Purchasing a company’s stocks basically implies that you are buying into ownership of the said company.
Does this make you an equal to the CEO like Apple’s Tim Cook? Definitely no. But it grants you voting rights in key meetings.
The main reason why you would choose to buy stocks is to make money. That boils down to two possible ways:
Companies normally sell their business shares with the intention of raising capital. The money generated can then be used for a wide range of initiatives. For instance, it could be used to fund a new product line, invest in growth, pay off debt, or expand your operations.
The process by which companies begin to issue their stock to the public is referred to as Initial Public Offering (IPO). The moment this stock gets to the market, investors buy and sell among themselves. Those who decide to buy a stock often do not buy from the company but from other investors.
The stock market is a general term referring to markets and exchanges on which shares belonging to a publicly-traded company are bought, sold, and issued. Each country can have numerous markets where transactions in stocks and other securities take place.
Even though the terms stock exchange and stock market are used to refer to each other, the former is a subset of the latter. A person who tells you they trade in the stock market basically means they buy and sell shares on stock exchanges which are a part of the overall stock market.
Some of the leading stock exchanges in the United States include NASDAQ, Chicago Board Options Exchange (CBOE), and New York Stock Exchange. These top national exchanges are what form the stock market of the United States.
The primary role of a stock market or equity market is to trade in stocks/equities. However, there are other financial securities that are traded in this market including:
All trading in stock markets can be viewed as happening in a controlled, managed, and secure environment. Fair price practices are implemented in order to facilitate transactions by the thousand of market participants.
Thanks to technology and the Internet, you can easily buy stocks online. We recommend eToro as the go-to platform for all your stock buying and selling needs. The essence of this trading platform is to simplify the selection of stocks.
eToro’s user-friendly interface that is easy to navigate through makes it one of the best platforms for beginners. It also has a wide range of advanced features that seasoned traders might want to have a look at.
Minimal fees are charged while traders are able to get started with as little as $5. Furthermore, starting to invest on eToro is a simplified undertaking. Here is a breakdown of how to go about it.
Never judge a stock by its share price. A common mistake that people make is to assume that a low-priced stock is cheap while a high-priced one is expensive.
The truth of the matter is that stock price has little say on the stock’s value. More intriguing is the fact that it does not indicate whether the stock is headed up or down.
The price of a stock is determined based on two key factors. These are:
Any good news regarding the company will always positively impact the stock price. If the news is negative, the prices take a downward trend in stock prices.
Stock value is calculated based on 4 key elements:
These financial ratios play a crucial role in summarizing the health of the company its financial statements.
The two main types of stocks that you can buy are:
You might decide to buy preferred stock if you want to be protected against easy loss of value. However, these stocks are less likely to gain value.
You might decide to go for common stock if you are looking forward to a potential long-term return.
Buying stocks could be one of the best decisions you have ever made. Some of the benefits you can expect from doing so include:
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Some people might find it a bit confusing, whether to proceed and purchase stocks through an online broker. There is no problem in doing so as long as you are dealing with a licensed and regulated broker. A little bit of research from your side is required to ascertain this.
Some of the benefits you can get when you purchase stock through an online broker include:
Besides buying stock through online brokers, you also have the option to use traditional brokerage service. The option to do this has been around for long and will avail you with the following benefits:
The existence of brokers does not necessarily mean that you have to use the service. You could decide to purchase the stocks without their involvement.
There are two main ways to do so:
Consider direct stock sales from companies, especially blue chips, to investors. Using this option is subject to low trading fees.
There are a couple of employee pension plans that permit self-directed investment. You can choose among other securities your own stocks, ETFs, and mutual funds.
Having made the decision to invest in stocks, the next question is how much you should actually put in.
Before the advent of online trading, investors would typically need $500 to $1000 to participate in the stock market. Today, you are able to participate with as little as $5 from the comfort of your smartphone.
With such a small investment, you still stand a chance to make a profit when you play your cards well.
The exact amount of money you are willing to invest should be one that you can be comfortable losing. Never use money meant to meet basic needs in the house to trade stocks. Some may have taken such a risk and it paid off but there are many others who end up falling into financial jeopardy.
There is no single platform that will give you an outright guarantee on the amount of money that you will make from stocks.
However, looking through historical data on stock returns can be a pointer. A source for this data can be the S&P 500 index, which is made up of 500 top companies in the United States by market capitalization.
In CFD stock trading, you are literally performing stock trading but then you do not own the stocks. CFD involves the seller and buyer getting into a contract and settling on the difference between the buy price and sell price.
When buying stocks, you become the owner of the purchased stocks. Your decision to buy or sell is not based on a contract agreement but rather on the availability of a favorable price.
Every talented investor out there knows that you can never put all your eggs in one basket. A very important rule in stock trading is diversification.
Make sure that your stock portfolio is diversified across sectors, company size, and geography to earn a stable, long-term return.
One way of implementing stock diversification is to make an investment in cyclical and non-cyclical stocks. Cyclical stocks perform better when the economy is growing. Non-cyclical stocks perform better when the economy is slow.
Sell orders are the most advisable way of selling stocks. The moment you have determined the price at which you ill place a sell order, you need to decide on the type of sell order to use.
The main types of sell orders to consider are:
Keenly evaluate each order before choosing your preferred. Investigate the benefits and demerits of each to decide.
Buying stocks in 2020 is far much easier than you ever thought. With the existence of online stock trading, you have fewer financial barriers to participate. An amount as little as $5 will get you started.
We recommend that you use eToro to perform your stock trading activities. This platform has versatile features that will give you an appealing trading experience.
Regulated BrokerVariety of CoinsAvailable via App
when trading CFDs with this provider
Disclaimer: Please note that the articles, news, reviews and all the content of this website should not be considered as a trading advice. The nature of investing is speculative and there is a risk to lose the invested capital completely. When investing seek a professional advice and make your own due dilligence. This site is not intended for use in countries where trading and investing is prohibited. This website is free for you to use but we may receive remuneration from the companies we feature on this site.