How to buy stocks and investments
As I mentioned in my previous article, the majority of investors probably never will need to buy stocks on their own. For most people, it is stupid, as one can’t get the diversification, or overcome the brokerage fees involved to make more than they would in a good mutual fund. However, if you have special knowledge or expertise about a particular company or industry, you may be dying to try your hand at individual stock picking.
Again, I want to emphasize, unless you have some serious money to work with, $250,000 or more, or have inside information that gives you an advantage, I would not suggest this. But, if you do meet this criteria, here is what you should do.
Decide what level of service you require from a broker. Do you need someone to hold your hand, that you can call every day and ask, “How is my Guptacorp stock doing”. If so, you are going to pay for that. Check with friends, colleagues, and online ratings for “full service” brokers. They will charge you an arm and two legs, but they will hold your hand.
If you know exactly how much you want to invest, how many shares you want to buy, and know some simple terminology like “limit order” and “all or nothing”, start a discount brokerage account. Again look for online ratings with J.D. Powers, as new ones pop up all the time, and offer better and better deals. I like Scottrade for beginners, as they offer $7 trades, yet have offices where you can go in and yell at somebody (just kidding, I have been told they are very helpful to newcomers). They can walk you through your first few trades and show you how to use the online tools.
Another reason I like Scottrade is that you can go to the office and fill out your brokerage application and hand them a check. Many people feel more comfortable with this face to face interaction with financial transactions. I think it goes back to the way we have done banking for so long. If you feel more comfortable, or just don’t have the time, many brokers now let you do the application and deposit online. You never have to see anyone. It is up to you.
Even with an online only account, be sure to review your account periodically, as mistakes do happen. Hard to believe, but even the wizards of Wall St. make mistakes. Ever heard of AIG? Same thing goes for when you make a trade. Make sure the trade actually is confirmed and completed and the shares are in your account. Don’t just push “execute trade”, and go off to work. Most confirmations are now done in seconds, so it is not like the old days I remember where you wouldn’t find out for several hours if your trade went through or not. If you know what you want, and have a little knowledge, a discount broker may be able to save you money (on trades anyway!).
