Learn How to Buy Stocks Online
Take the Gamble Out of Investing Online
Approximately 12-percent of all Internet users buy stocks online or sell them online. The typical online buyer is male, between 30 and 49 years old and probably has a college degree. If you don’t fit into that category – no worries – there are plenty of other people trading online as well.
If you’re tired of slaving for every dollar and you’re ready to let your money work for you, buying stocks on the World Wide Web might be the answer. Before jumping in, however, it’s best to learn the ropes and to familiarize yourself with the ins and outs of online investing. Don’t look buying stocks as a get-rich-quick scheme, it’s far from that. However, with patience and a few trading tips, you can build a solid portfolio that will serve you well in the future.
Basic Online Investment Tools
In order to be successful, you must be able to find investment opportunities and analyze their potential and then purchase and carefully track the investments. When the time is right, you should be ready to sell quickly to realize the biggest profits.
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Where to Find Investment Sources
There are many ways to find investment opportunities. Some require using a broker to purchase the stocks and other can be purchased directly. Here are some ideas for locating potential winners. Because you’re putting your capital at risk, it’s wise to research thoroughly before taking the leap.
- DPPs: These are direct purchase plans and they allow you to bypass a broker and buy stocks directly from the company you’re interested in.
- Company Profiles: These are found on nearly every company website and you can learn a lot about the company’s organizational structure, its main competitors, whether it’s financially sound, the services and products it offers and who the people are in management positions.
- Investment E-zines: These are basically online newsletters or magazines that do the hard work for you. Be aware that an e-zine put out by the company you’re interested in is going to slant your purchase toward their company. Most investment e-zines are educational and chock full of facts and stats for buying stocks.
- Investor Directories: These directories are highly sought after for the in-depth stats and analysis provided on specific companies. Most online stock investors place high value on investor directories. The caveat here is similar to that of e-zines, however. Be careful not to be drawn in by a directory that is published by a company that is also trading publically.
- DRIPs: These Dividend Reinvestment Plans, tell you how you can take part in reinvestment programs that allow you to buy stocks online without going through a broker. Most DRIPs offer discounted stocks.
- IPOs: Initial Public Offerings are the cream of the crop, and they represent the first few months of a newly traded stock. A little more risk is involved in buying IPO stocks but, in many cases, this is your chance to “get in on the ground floor,” so to speak. Companies preparing to go public announce their IPO intentions months ahead of their public launch. Do your research early because popular IPO stock prices can soar right out of the gate.
Buying Stocks Online
Analyzing: The Next Step in Online Investing
A bit of guesswork comes in during your analysis of the stock, but you can minimize the risk by using the information that’s out there to predict the outlook of a stock in the future. Here is a list of stock analysis tools that you should take advantage of before buying stocks.
Earnings Estimates: You can get these from stock analysts and brokers without committing to buying the stocks through those brokerages. All you need is the information.
Annual Reports: Some companies post their annual reports online but if they don’t, you can contact the company directly and request the last few years of their annual reports. For the best analysis, study at least the last three most recent annual reports to look for company health and growth trends.
SEC Filings: Security and Exchange Commission filings offer publicly traded financial stats. A company must submit its SEC filings at least every 90 days, but if the company is impacted by a major event, it will file an additional SEC to represent its new position.
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Using a Traditional-Service Online Broker
Most online investors opt to trade stocks through a traditional brokerage. These are the same stock brokers that you would use if you didn’t browse the Internet. A good traditional broker should put YOUR investment interest first, but because the broker makes more money when you buy more stocks, an unsavory broker might push you to buy stocks that aren’t well researched. If you’re going with a traditional broker, ask him or her for a list of clients that you can call as references as to the broker’s integrity.
A good traditional broker will:
- Treat small investors with the same quality service that large investors receive
- Calculate your tax liability when selling stocks
- Notify you of upcoming IPOs
- Provide other investment opportunities, such as REITs
Online Investment Brokers
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Finding a Quality Online Discount Broker
Quality, integrity and service are essential in an online discount broker. Before choosing a discount broker, ask yourself the following questions:
Is the discount stock broker’s site easy to navigate?
Does the brokerage offer online chat support or provide a phone number that you can call 24/7 with your questions?
Is the site stable? If it is down frequently, you could miss valuable buying or selling opportunities.
Does the site give you access to the latest IPOs, immediate quotes and well-researched stock information?
Are there hidden fees? Unsavory discount brokers can take a chunk of your change if they charge additional fees. Read the fine print, but don’t stop there. Print a copy of their official terms of usage and study it carefully before signing up.
Hidden fees can include, but are not limited to:
- Certification mailing fees
- Fees to withdraw capital from your investment account
- Higher fees for small purchases
- Inactivity fees
- Minimum balance fees
- Transfer fees for adding or subtracting from your investment account
Buying Online Stocks on a Shoestring
Many of the big online stock brokers require a minimum amount of money in your investment account. Check the brokers above, because they can (and do) change their minimum-rate policies virtually overnight, but take a look at these brokers as well, because they usually offer a low (or no) minimum investment when opening an account and they allow smaller stock purchases.
- First Trade: firstrade.com
- Harris Direct: harrisdirect.com
- Trading Direct: tradingdirect.com
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Comparing Online Investment Brokers
Some discount brokers offer very few services, making them more beneficial for experienced investors, but leaving a lot of questions for newbies. When you’re comparing online brokers, make a list for each one and find out if they offer summaries for orders, portfolio value, cash balances, and archived trading activity. Does the broker offer checks you can write from the account? Does he provide dividend collection? Will you receive a debit card? Are wire transfers permitted?
Not all brokers offer the same services. Make another list to indicate what each broker sells in addition to stocks, because you may well want to diversify your holdings.
Does the broker offer investment opportunities in:
- Stock options
- CDs (certificates of deposit)
- Mutual funds
- Foreign and domestic stocks
- Precious metals