Sometimes the stock market can be an unnervingplace, but it doesn't have to be.  As an amateur investor I am here to tell you that it isn't as hard as a broker may tell you to invest on your own.  Investing can be extremely rewarding, but also can be extremely unforgiving.  As we journey through how to buy and sell stocks, remember that investing comes with the risk of losing all that you have invested.  After you read this guide you should be able to research a stock, buy a stock, sell a stock, and if everything goes well, earn a profit. 

 A step often forgotten by independent investors, research is one of the most important steps.  A good note to make is that research does not stop when a stock is bought, it should continue all the way until the stock is sold.  But what should you research?

Before you buy

 

Before you buy any stock you must know what they do.  In essence how does the company earn money.  If the company is making money off of selling parts of itself, it might not be a good investment.  Sometimes the greatest asset to research is the company's own website.  If you can't figure out what they do from their own site, its a good sign you might want to stay away. 

Another must is to look at the companies balance sheet.  You should be able to find a balance sheet on any of the major market websites.  In order to find a company's balance sheet type their name into the search on the market site.  It will usually come up with a few ideas, but you should be able to select the company you were looking for.  Next find the link on the page to the company's balance sheet.  The thing your looking for here; does the company make enough money to pay its bills.  To find this you will look for the gross income.  If the gross income is positive then the company has made its obligations.  A good idea here would be to write down the company's ticker symbol.  That is the 3 or 4 letters that the market uses to identify your stock. 

After you have bought

 

This is the most crucial time to research.  You know own the stock, but what do you do with it.  Until the stock is sold you have neither made a profit, nor taken a loss.  In order to make that profit or minimize that loss we must continue to research the basics.  Is the company still making money?,  Can the company still pay its bills?, are a couple of good questions to ask.  But the bigger question at hand is how do you make the profit.  A stock by nature will have its ups and downs.  You can look at any stock chart or graph and see that at some point any given stock had a high and a low.  When your research tells you that the stock is close to a high, it is probably a good time to sell.  Never try to predict a top, it is better to sell on the way up, than catch a steep decline after a missed top.

 

 

You have completed your pre-buy research and now you are ready to buy a stock, but where? There is a few options for you at this point. You can either contact the company directly and inquire about how to purchase their stock, contact a broker and have him place the order for you, or use one of the many online brokerages and do it yourself.

Contact the company

This option is the most rarely used as the company will often tell you that they will only deal with brokers. If by chance the company will sell you the stock, they will often have a minimum purchase. The company will then issue you a certificate of stock. Often times you will have to go to a broker to sell this certificate when the time comes to cash in.

Contact a Broker

A broker is going to cost you a percentage of every transaction. But with that fee a broker will be able to advise you on whether a stock is a good choice. Truly a Broker will buy anything you want him to, but having a broker is like having a paid researcher. Often times brokers will be able to look at stocks that you wouldn't have thought of. The only downfall to a broker is the fee that you must pay.

Use an Online service

There are many online services that can help you buy and sell stocks. Somewhat like a broker, they will charge you a fee to use their service. The biggest difference is that most online services will only charge a minimal fee per transaction no matter how many shares you buy, as opposed to the that of a broker whom will often take a dollar percentage of the transaction.

Any of the three choices can be good options depending on what you want to do. But since you are reading this guide I will assume you are going to use an online service. I am not here to recommend any services, but some options available to you are:

www.sharebuilder.com

Sharebuilder is intended for people that do not have a lot of money to invest. You can set up a monthly investment withdrawal and they will charge you $4 for the automatic investment. If you do not have enough in your account to buy a full share, sharebuilder will buy partial shares in a company.

www.schwab.com

Schwab is an online brokerage with a few more restrictions. They have an account minimum as well as a little higher transaction fee. They do offer online advice from real brokers as a benefit. Schwab's trading fee is $12.95 for the first thousand shares.

www.zecco.com

Zecco is another low cost online broker, they offer trades starting at $4.50 per trade with the option of getting free trades after certain stipulations are met. Much like sharebuilder there is not a broker to talk to you.

 

When buying a stock make sure to use a limit order so that you can control the price that you would like to pay.  If you place a market order you may pay several pennies to several dollars more per share. A good thing to remember when buying stock is to spread your money around. Never put all your eggs in one basket. It is always good to have your money in different parts of the market, for if one part of the market fails, you have not lost all your money.

Your work is about to pay off, it is time to sell your shares. You have conducted your research and found a good exit point. Go through the same avenues as you have chosen before to buy your shares, to sell them.  As one stock is sold constantly keep a look out for a new one to take its place.   Once again make sure to set a limit order as to increase your profit margin, or decrease your loss.  Good luck on your new journey into the purchase of stock.