How to Buy Your First Stock with Confidence

 Are you thinking about buying a stock for the first time? Buying a stock for the first time can be intimidating if you've never done it before. If this is your first time buying a stock, this article will teach you how to buy a stock.

Before you can buy a stock, you need to choose a stockbroker. There are two types of stockbrokers: a full-service broker and a discount broker. A full-service broker offers investment advice whereas a discount solely takes care of executing your stock orders. If you understand investing and have done your stock research, pick a discount broker; they are considerably cheaper.  

 After you have chosen your stockbroker, you will need to fill out your application and fund your account. The amount of money required to open your account can vary significantly. Full-service brokers usually require a larger amount of money than discount brokers. The amounts can vary from as little as $250 to $10,000.

The next step is to place your order. First, you need to know the stock's symbol. The stock symbol is an abbreviation of the company's name. For instance, Potash Corporation's symbol is POT. If you don't know the stock symbol, most internet stock sites have a symbol lookup. You will also need to know how many shares you want to buy. One hundred shares is called a round lot whereas less than 100 shares is called an odd lot.

 Next you will need to decide whether you want to place a market order or a buy limit order. A market order buys the stock at the current market price. On the other hand, a buy limit order buys the stock when it reaches a specified price or below. Sometimes stocks will rise rapidly, and a buy limit order prevents you from paying too much for a stock. Limit orders are only good for a day unless otherwise specified. Therefore, if you want a standing order, you need to specify, it is good-till-cancelled.

 At the time you purchase a stock, you can also specify if you want to place a stop limit order. A stop limit order triggers the stock to be sold at a specific price. This is advantageous because you don't have to continually monitor the price of the stock. Furthermore, it limits your risk. In today's volatile markets, stocks can drop quickly.

Finally, you need to specify whether you want the stock left in streetname or delivered to you. When a stock is in streetname, the stock is registered in the brokerage's name. Leaving it in streetname is convenient because you don't have to deliver the stock to the broker. Since stock transactions are required to settled within three days, most brokers make you deliver the stock before the stock order is placed. Furthermore, you won't have to worry about misplaced, lost, or damaged stock certificates. Even when the stock is in streetname, the quarterly reports and other paperwork will still be sent to you.

The process of selling a stock is the same. You need to know the stock symbol and the number of shares you wish to sell. You can either sell your shares at market price or place a sell limit order. A sell limit order works the same way as a buy limit order. The stock is not sold until it reaches a specified price or above. Again, if you want a sell limit order to last longer than a day, you need to specify it's good-till-cancelled. When you sell a stock, if it is not in street name, you need to deliver the stock to your broker before you place the stock transaction.

When either buying or selling stocks, be sure to keep the paperwork. This is your confirmation and proof of a purchase or sale. When you sell the stock, you will need this paperwork to figure out your capital gain or loss.

How to buy a stock is not difficult when you understand the terminology. To summarize how to buy a stock, these are the steps:

• Find a reputable broker
• Sign up for an account
• Fund your account
• Know the symbol of the stock
• Know how many shares you wish to buy
• Decide upon the price you wish to pay and whether it will be a market order or buy limit order. If placing a buy limit order, specify if it's for a day or good-till-cancelled
• Decide whether you want to place a sell limit order and the specified price you wish to sell it at

If you forget the terminology, do not worry. Your stockbroker will be more than willing to help you. The most important thing to remember is research your stock thoroughly before buying it.