How To Buy Stock Online – Your Ultimate Guide

If you would like to buy stock online, then you’re making a smart move – because more and more traders are using the Internet to place their trades conveniently and easily by using an online brokerage service. In this guide, we are going to share some further information on the subject of purchasing stock online, so by the time you have finished reading, you will know which steps to take next.

To begin with, the most efficient way to buy stock online is to simply use an online broker, but it’s important to remember that not all of these services are created equally. In general, they come with various features and functions that you need to understand before you settle on a specific platform.

In particular, you need to pay close attention to the commission that’s involved when using an online brokerage to trade stock for you. In most cases, this commission will be a percentage of the stock purchase price, but there will be a variety of different deals available if you investigate further.

Next, it’s well worth finding a stockbroker who has expert advice and knowledge to share – because this goes a long way towards making sure you purchase stock that will give you a respectable return on your investment rather than become a liability. Several of the top online stockbroker services come with a range of educational and training materials, and this information is very useful – especially if you are a beginner.

Something else you need to consider when it comes to purchasing stock online is whether you want to use a full-service solution. The key benefit of using full-service brokers is that you will not need to follow the markets yourself, and you can trust the experience and knowledge of your broker to make savvy trading decisions for you.

Of course, this involves a great deal of trust, and there will usually be no guarantees of a return on your investment –so you will need to do plenty of research into the overall track record of any full-service broker before you part with your cash.

However, many people greatly appreciate the convenience offered by a full-service solution, and this is often an effective way to invest part of a retirement fund or a cash windfall that you want to make the most out of. By placing these funds into the hands of a skilled broker, you will be able to secure your financial investment for the long term, and possibly earn an excellent profit in the process.

Yet another option you may be interested in is using a discount broker. While these services do not require such a hands-on experience, they can certainly save you quite a bit of money – so many people refer them for this reason alone.

If you already have expert knowledge in the stock market and know exactly which stocks you want to buy and sell, then using a discount broker who charges a minor fee will usually be a good decision. In most cases, these services are best for people who already have a great deal of experience, so they do not need the extra handholding that comes with using a full-service broker.

Finally, it’s wise to devise a system for buying and selling your stocks, rather than doing it in a careless and haphazard manner. Many people use a stock pick service which gives them expert picking advice, and this type of assistance can be a huge boon to your stock trading efforts.

Conclusion

Overall, learning how to buy stock online is a relatively straightforward process – but the hard part comes with knowing which stocks to buy and when to sell them. However, the first step is to find a quality broker, and the information in this guide should guide you towards a savvy decision.

source: stocktrading4beginners.info

11 Common Investment Mistakes To Avoid While Investing In Stocks

There is only one rule to be successful while investing in stocks and that is “to not lose money!” Despite the information overload these days, people still make mistakes investing in stocks and lose money. I am not an exception in this case as I too made all of the mistakes that I have listed below, at one time or another, while investing in stocks earlier in my investment life. I am sharing here those experiences so that somebody else could learn from my mistakes. So here are those 11 common investment mistakes to avoid while investing in stocks.

Borrowing to Invest in Stock Markets

 

We hear success stories about making easy money in the stock markets from our relatives, friends, stock broker etc. Often we fail to know that only success stories are propagandized and failure stories deliberately have been hidden from us! By the time we hear those success stories, we might have already invested our spare cash in some other assets like real estate, gold etc. Greed spares none! We become enthused. To get the seed money, we would either pledge those assets or would borrow new unsecured debt. To be successful in the stock market, we need to have a long-term view and some cash that doesn’t need to service debt, money that we do not need for at least the next five or ten years. If we borrow to invest, interest adds up monthly to our investment costs. So we will be investing under a compulsion to find more returns than what we pay out as interest. That drags down our chances of success. Ultimately we would end up making only our lender rich!

Investing in Startups and IPOs

 

In order to ascertain the investment worthiness and to arrive at a rational investment decision based on some conclusions, we should look for a business or a company that has at least withstood one economic cycle (business cycle). An economic cycle is usually 8 to 11 years long. Based on how the company or the business withstood tough times of an economic cycle, we make an assumption that it will withstand in the same manner at tough times down the lane in the next 5 or 10 years. Fragile companies and business ideas hardly survive an economic cycle and wither away in a matter of years. Eg., the Internet companies of the 1990s that went bust along with the dot com bubble. So any company without a history or track record is undoubtedly not investment worthy howsoever brilliant the business idea or marvelous the company is. To preserve our capital, it is better to go for OPOs (old public offering) at a discounted price than going for IPOs (initial public offering) or startups.

Heeding to Advices, Tips, and Stock Market Predictions

 

Investing heeding to the stock tips, advices, and stock market predictions is the next big mistake that most of us make. You get a ton of them; from your stock broker, on the Internet, in the dailies, magazines, TVs etc. Never rely on such stock market predictions to invest your money. Heeding to those stock tips outright, even if the information is from paid sources, will rip you off your money because those who make those predictions, those who propagate those tips and advices have their own underlying vested interests in making you buy or sell. You should be able to substantiate yourself the reasons why you invest in a stock or why you sell a stock. Else, you would end up making only your stock broker rich.

Investing in Actively Managed Funds and Through Money Managers

 

Most people spend maximum time and effort earning money but hardly any time managing and growing it. If you want to become rich, you should be able to manage your money on your own. You should learn how to invest rather than depending on an investment manager (portfolio manager). It is not rocket science. All of us are not born intelligent, we learn by reading and listening. Why not apply that here too? If you still cannot find time to research about individual companies, investing in an index fund regularly over time should fetch you average market performance. The results still should be far better than an actively managed fund run by the so called pundits who eat 2% a year of your funds as fees. If the fund managers have that secrets of making you rich, why not they themselves become rich using those secrets rather selling you the investment products? So have in mind that no one else could be a better money manager for your money rather than yourself. Find time and will to make it on your own. Do investments in the stock market on your own or you would end up making only your money manager rich.



 Looking to Time the Market


Another mistake that investors often make is trying to time the market. You either sit sucking the thumb expecting the market to fall more for you to start buying where as Mr. Market does the opposite or you end up selling too soon expecting the price to fall thereafter. Sometimes, people don’t sell at all even after the P/E having run into exorbitant numbers! I would sell my business if some potential buyer or if Mr. Market expresses interest to buy my business for an upfront payment of 40 or 50 years of profit. I buy and sell stocks as if I would buy or sell a business. Anytime is a good time to invest, as long as you are able to find a stock (business) that you believe is undervalued and you have the patience to sit tight. If the price falls below your purchase price, be greedy, try to buy more diverting all your cash flows! Time and markets wait for none. In the short term, the stock markets act like a voting machine where as in the long term, they act like a weighing machine. Only you need to identify when it is a voting machine and when it is a weighing machine.

Investing in a Company with Questionable Management Integrity

 

Investing in a company that has questionable management integrity is like giving your money to a thief for safekeeping. So the companies that care a damn about shareholder wealth maximization, minority shareholder interests, and labor interests are needed to be avoided to preserve your capital while investing in stocks. We have seen a lot of companies vanishing into air along with shareholder money. Honesty is a very expensive gift; don’t expect it from cheap people. If you are still compelled to invest in such companies, donate the money to charity rather than betting on thieves!

Buying into Turnaround Stories

 

Often you hear turnaround stories in the market but they may be the propaganda by those who are already trapped in the shares of those companies. These companies may end up without turning around at all. Transforming a multi-million or a multi-billion company is terribly difficult. Only exceptional people do it and failures are more common than success stories. So unless you have thorough evidence that the information is true to your satisfaction, investing in such turnaround stories will prove to be a blunder. Buy turnaround stories on proven results, not faith.

Investing in a Company That has no Competitive Advantage

 

Inflation adversely affects the purchasing power of consumers. If a company is finding it tough to pass on the rising costs to the consumers due to reasons like stiff competition, it is ought to wither away in due course. It is here where the competitive advantage of a company over the other companies in the same industry, a widening economic moat which the competitors are unable to break, comes to the advantage. Buying a company that has got no competitive advantage puts your capital at risk.

Investing in a Changing Technology Company

 

Technology is changing at a fast pace in today’s world. We are seeing personal computers and laptops giving way to tablets and smart phones. We saw phonograph records giving way to magnetic tape cassettes which in turn gave way to CDs and DVDs and now to pen drives. Same is with fat TVs to flat TVs, film photography to film-less photography. All these made a lot of companies go bust, belly up. Eg. The Gramophone Company, Kodak etc. Who knows what is in store for tomorrow? So why should we risk our money investing in an industry where the technology is constantly changing?

Investing in a Business Outside Your Circle of Competence

 

People get attracted to investing in glittery businesses that seem attractive from outside but fail to create wealth. For e.g., airline business. If you look at the airline stocks globally, they have little history of creating wealth for the shareholders. The net wealth creation in airline business since Orville Wright flew his first flight at Kittyhawk in 1903 has been next to zero. However, as I said earlier the glamour of the business keeps attracting new investors to set up airlines or to invest in existing airlines. It has evaporated capital over the past century like no other business but people still keep coming back to it and put fresh money in. So study the business model before investing in a company. Invest in a company that is within your circle of competence, invest in a simple business that you know the best rather than succumbing to the glitter and glamour surrounding a business.

Investing in a Debt Laden Company

 

Debt, especially huge, is a major concern both at an individual level as well as at a company level. It is like trying to run with your legs tied. If a company becomes solvent, creditors have utmost rights on the cash and assets of a company than the shareholders, though the money has the same value irrespective of whether it is brought in by the creditors or the shareholders! So investing in a heavily debt laden company is nothing but suicidal! Why should we want to risk our capital, hard saved money, investing in such a company?
Investment mistakes are abound and aplenty. Should you screen your stock pick for these common investing mistakes before you make an investment and buy it at half the price below its intrinsic value, undoubtedly you should be successful with your strategy investing in the stock markets. All these investment mistakes have made me prudent but with a cost. That doesn’t necessarily mean that you too should lose money to learn these lessons. Learn from the mistakes of others because you can’t live long enough to make them all yourselves!

source: mtherald.com