Investing is a way to set aside money and let the money work for you over time. One of the methods to invest money is to buy shares, and then sell them at higher prices. In the financial markets, shares refer to equal units into which a company’s capital is divided. Buying shares begins by setting up a brokerage account. Once set up, you can add money to the account, and find, select and invest in individual companies.
How to buy shares for beginners?
Select an online stockbroker
One of the ways is to buy stocks online, through an investment account at an online stockbroker. Once your account is funded, you can buy stocks on the online broker’s website in a matter of minutes.
Opening an online brokerage account is as easy as setting up a bank account: You complete an account application, provide proof of identification and choose whether you want to fund the account by mailing a cheque or transferring funds electronically.
Once you’ve set up and funded your brokerage account, you may start picking stocks. You may start by researching companies you already know from your experiences as a consumer.
Don’t let the deluge of data and real-time market gyrations overwhelm you as you conduct your research. Keep the objective simple: You’re looking for companies of which you want to become a part owner.
Once you’ve identified these companies, it’s time to do a little research.
Start with the company’s annual report — specifically management’s annual letter to shareholders. The letter will give you a general narrative of what’s happening with the business and provide context for the numbers in the report.
After that, most of the information and analytical tools that you need to evaluate the business will be available on your broker’s website, such as filings with the regulatory authorities, conference call transcripts, quarterly earnings updates and recent news. Most online brokers also provide tutorials on how to use their tools and even basic seminars on how to pick stocks.
How to buy shares for beginners – decide the numbers
You should feel absolutely no pressure to buy a certain number of shares or fill your entire portfolio with a stock all at once. You may consider starting small by purchasing just a single share to get a feel for what it’s like to own individual stocks and whether you have the fortitude to ride through the rough patches with minimal loss. You can add to your position over time as you master the shareholder swagger.
New stock investors might also want to consider fractional shares, a relatively new offering from online brokers that allows you to buy a portion of a stock rather than the full share. What that means is you can get into pricey stocks with a much smaller investment.
Choose your stock order type
Don’t be put off by the numbers and language on your broker’s online order page. There are a lot more complex trading moves and complex order types. There are two order types: market orders and limit orders.
Optimize your stock portfolio
Going forward, you should remember that things may turn difficult, but you should remember that every investor goes through rough patches. The key to coming out ahead in the long term is to keep your perspective and concentrate on the things that you can control. Market gyrations aren’t among them.
Place your order to buy shares
Once you’ve decided which shares to buy, purchasing them is usually the easy bit. If you’re in your online account, you’ll get offered a price and can just click a button to “deal now”. You’ll receive a contract note shortly afterwards.
Pay for the transaction
You’ll need to have sufficient funds in your online share trading account to cover the cost of the transaction, including the brokerage fees that apply.
Typically, you’ll pay a one-off charge for buying and selling shares. If this is a fixed amount, it becomes more economical on larger share purchases.
Alternatively, some brokers charge a percentage of the assets that you hold on the platform. You’ll need to crunch the numbers to work out which one of these options is likely to suit you best.
Monitor the performance of your shares
There are two ways you gain from investments: one is from an increase in the capital value of the shares, the other is when the shares pay dividends.
You’ll need to monitor the performance of your shares, and the frequency with which you monitor them will depend on your investment strategy. For example, if you have a long-term investment strategy, you may only check in and see how your shares are performing every month. If you have a medium-term strategy, it may be a good idea to check each night or each week. Whichever option you choose, you can review the performance of your investments by logging into your online trading account.
You may also want to set limits on your share trades. For example, you could set an automatic sell if the shares lose more than 10% or gain more than 50% of their value. This will limit how much money you can lose, or it may prompt you to sell out when the shares gain in value.
Sell your shares when you want to
When you decide to sell your shares, the process is very similar to the method of buying shares. When you’re logged into your online trading account you’ll be able to select an option to sell your shares at the current market price. You will receive the appropriate confirmation that your stock has been sold, and the revenue from the sale will arrive in your online account.