Investing in the stock market is an excellent way to earnextra income. You can be an active trader and watch for dips and surges in themarket or be a passive investor and wait for your assets to increase in valuein the long run.
A lot of people say that investing your money in the stockmarket is better than having it sit idle in the bank. The rewards aredefinitely better with the former, but the risk is relatively greater, too.It’s up to you if you want to take the chance for the possibility of yourmoney’s exponential growth.
Here are the basic steps on how to buy stocks online:
1. Find a Broker
Stockbrokers are licensed professionals who can purchasesecurities on your behalf. Traditionally, you had to call your broker everytime you wanted to buy and sell stocks. This made the process more lengthy and,often, inconvenient.
Today’s generation of brokers, on the other hand, serve asconsultants who give you professional advice on the perfect portfolio setup foryour lifestyle and financial goals. They consider your age, marital status,risk tolerance, income, assets, and debts, among others.
There are also online brokerages nowadays that give you amore hands-on approach to your investments. These platforms give you fullcontrol over your assets at the cost of a minimal service fee.
Discount Brokers with assistance are another option that youcan consider. They have the same functions as online brokers, but they offermore in-depth support, which is useful for investing beginners. Think of themas the online counterpart of traditional stockbrokers.
Find the right broker type for you and your financial goals.Read reviews on potential brokers to ensure that you can trust them with yourmoney.
Alternatively, you can check out this step by step guide on how to buy stocks online without a broker.
2. Understand the Different Types ofStocks
Through stocks, you are putting money into a public company.These assets are typically issued as one of two major kinds of stocks: commonor preferred stock.
Here’s an in-depth look at these two types:
- Common Stock – This is the typical arrangement for most stockinvestments. With this, you are purchasing ownership of a company. If you buy alot of shares, you get to be one of the people who’ll make decisions on theorganization’s future.
- Preferred Stock – Preferred stock works similar to bonds, where yourinvestment serves as a loan to the public company. Investors are paid with afixed dividend. They are still able to make decisions for the business.
Common and preferred stocks are then further categorizedinto company size, industry, location, and style. Remember to diversify your stock portfolio. This means that you shouldpurchase different types of stocks to lessen the risk when the market dips.
Remember, you could always invest in environmentally friendly and ethical stock options, read this guide from AskTraders for more information on those options.
3. Choose the Number of SharesYou’ll Buy
It’s better if you start low and work your way up when itcomes to investing. As with any other venture, the process entails a learningcurve. Don’t give yourself a target on the number of stocks that you’llpurchase. Instead, study the market and understand its inner workings untilyou’re confident of putting in a substantial amount.
4. Determine the Stock Order Type YouWant
After deciding the type and number of stocks you’ll buy, youshould know the different stock ordertypesto finalize the transaction. You should also understand the terms “ask” and“bid.”
Ask is used to inform buyers about the lowest price that aseller can accept for their stocks. Bid, on the other hand, gives the highestamount that an investor is willing to pay for a particular asset.
These are the different stock order types:
- Market Order – Submitting a market order form means that you want topurchase or sell stocks in the current market price in the soonest possibletime.
- Limit Order – With a limit order, you can determine the price point thatyou want to pay for a particular stock. The transaction will only push throughonce the share’s price arrives at your specified price point.
Conclusion
Investing in the stock market can be daunting for mostpeople, but you just need to research thoroughly before diving into thisventure. Find a good broker and understand the different types of stocks andorders that you’ll encounter along the way.
With this, you can earn extra income from your savings.There may be risks involved, but the potential exponential growth of your moneyis worth it.
