How to buy stock, how to invest in stocks: investing in stocks reference!
Have you been looking for financially sound ways to make money? If so, the stock market is the perfect place to invest. Learning how to invest in stocks isn’t only simple, now is also the perfect time to learn how to buy stock because the market is low and slowly climbing up. That means that you can buy stocks for low prices now and as the economy continues to rise—as it has been doing since the early 2000′s recession—you will earn money on your investments.
Investing in Stocks 101—What You Need to Know
To start off with, you always want to make sure that you have enough money saved up so that you can still afford to live within your means, even if you take a dive in the market and lose your job. For most people, that means waiting until you about a year’s salary saved up. Next, divvy up a portion of that savings which you could live without—you’re going to, especially if you lose with your investment. In fact, plan to lose, this way when you win, it’s all the more sweet.
Next, you’re going to have a lot of reading and planning to do. In fact, if you think you’re going to learn how to invest in stocks today, you’re way, way, way off the mark. In reality, you won’t be investing in stocks for at least a few months. In the meantime, get your hands on some of the great reads such as The Intelligent Investor, The Interpretation of Financial Statements and Security Analysis, all three by Benjamin Graham, Common Stocks and Uncommon Profits by Philip Fisher, One up on Wall Street and Beating the Street, both by Peter Lynch and The Secret Code of the Superior Investor by James K. Glassman.
How to Invest in Stocks—Applying Theory to Practice
As you grow accustomed with these works and theories (these are the foundations of Warren Buffet’s theories on how to buy stock), you’ll start to formulate your own ideas. Take these ideas and apply them to the stock market, but not with real money. Instead, simulate your investments and track your imaginary wins and losses on paper until you can realistically begin to predict the trends in gains and losses. Follow the news about each company and read their spending reports, their annual reports and their 10K and 10Q reports that each company files with the SEC. Look for companies with 10% or more annual increase in earnings over the past year with sales and equity going up and debt going down.
Record all of your trial stock trades on a spreadsheet, being sure to keep track of your buy and sell dates, how many shares you are purchasing and at what price, whether you are making a profit or taking a loss (include commissions, dividend taxes and both long and short term capital gain taxes) and your reasons for selling and buying each stock. At the end of the quarter (or even two to four quarters), add up your net profit or loss minus commissions and taxes and then compare that number with the stock market index for that time (i.e. the Dow Jones Industrial Average and the S&P 500). This will give you a good idea about how you stack up with the big boys. If you are equal or ahead, you are ready to move into the real money and start investing in stocks. If not, hit the books again and keep practicing—it’s better to lose pretend money and time than real money and time.
How to Buy Stock—Contacting the Broker
Your next step in playing the stock market is to open up a brokerage account with a stock broker. This will allow you to start making the purchases and trades with real money in real time. When choosing a stock broker, be certain to thoroughly research the firm, person or business, checking out their website, talking with them on the phone and reading through online reviews. Consider your costs, mainly what their commission percentage fee is as well as any other fees that come into play. If you’re working with a discount broker, you can expect to pay between $1 and $10 per trade with some brokers offering X amount of free trades each year (when you meet the criteria). Also look for dividend reinvestment, research tools, customer service and a winning record with investing.
Once you have your account open, build up a startup portfolio consisting of between 10 to 50 stocks. If you’re investing in stocks during a bear market, look for blue chip stocks since these will provide the most return with the most safety, even during times when the market struggles. Apply your theories when choosing your companies, looking for growth, dividend payments and at least 30% EPS growth over the past decade. You also want to look for a debt to equity number that is under 1 and at least a 5 in high interest coverage.
Some General Advice for those Investing in Stocks for the First Time
When you first learn how to buy stock, you’ll likely hear and read a lot of advice—always consider your source. Don’t take advice from a perennial loser in the market. Also:
• Keep your winners and don’t buy more losers unless you have an excellent reason. As Peter Lynch said, get rid of the weeds and water the flowers.
• Stock tips are dangerous since they mostly come from people trying to get you to invest—they don’t care if you win or lose after they get you to buy their stocks. Warren Buffet threw out every stock tip and newsletter he got. Likewise, stay away from stock market coverage—you’re in this for the long haul, not to get scared.
• Never hesitate to consult with a stock broker if you have any questions.
At the end of the day, the most important thing is that you are well versed in the art of the stock market. To find out more about how to buy stock, click here right now and learn how to invest in stocks like a pro.