Stock investment is one way to accumulate wealth, but do you know how to buy stocks of your favorite companies ? For many novice investors, the stock market is full of complex terms, rules and strategies. How to get started and make good investment plans are challenges faced by many people.
This article presents the complete process from account opening to buying the first stock in a concise and clear way. Follow the 6 steps below to start building your own stock portfolio .
Open a brokerage account
The first step for novice investors to enter the stock market is to choose a suitable securities company or trading platform. Brokerage companies provide investors with trading platforms, market analysis, order execution and other services. When choosing a brokerage company, investors need to pay attention to the following aspects:
Transaction fees: including commissions, fees for using the trading platform, etc. For investors who trade frequently, brokerage firms with low commissions may have more advantages.
Platform functions: Make sure to choose a trading platform that is fully functional, easy to operate, and can provide real-time market conditions and information.
Customer Service: Good customer service can help novice investors get timely help when they encounter problems, and provide market analysis and trading suggestions.
Security and compliance: Choose a brokerage firm that is legally registered and regulated to ensure the safety of your funds.
It is worth noting that most major online brokerage firms have now eliminated commissions for online stock trading , which greatly reduces your costs when choosing a brokerage platform. However, certain types of investments, such as mutual funds and options, still charge commissions. Therefore, investors must review the broker's fee schedule to understand the potential costs.
After choosing a broker, fill out the application form as required and prepare information such as ID card and bank card. In terms of account types, standard brokerage accounts are suitable for ordinary investments, and individual retirement accounts have tax benefits and are suitable for long-term retirement planning. Margin privileges allow investors to borrow money to buy stocks, but the risk is high, but it also allows investors to trade or quickly withdraw cash when funds have not yet arrived.
Screening investment stocks
The next step is to identify the stocks you want to buy . Here are some tips you can follow during the stock screening process:
1. Invest for the long term
When selecting stocks, novices should adopt a buy-and-hold strategy and invest based on the company's future value. Avoid buying stocks because of short-term fluctuations. For example, although some popular stocks have a large short-term increase, the company's fundamentals are not good and the long-term investment value is limited. Investors should analyze the company's industry position, profit model, development prospects, etc. to find companies with potential.
2. Diversify investment risks
Don't concentrate your funds on one or two stocks. Even if you have little initial capital, you can build a diversified investment portfolio with the help of brokerage commission-free trading and fractional investment. Diversifying investments in stocks of different industries and sizes can reduce the impact of fluctuations in a single stock on assets. For example, allocating funds to industries such as consumption, technology, and finance can help balance losses when a certain industry encounters difficulties with stocks in other industries.
Determine the number of shares to purchase
To determine the number of shares to buy, first set the investment amount for each stock and then divide it by the current stock price. For example, if you plan to use 1,500 yuan to buy Alibaba stock and the stock price is 150 yuan per share, 1,500 divided by 150 will buy 10 shares.
Some brokers support fractional trading, which allows investors to invest flexibly according to their funds without being restricted by the share price. If your broker does not support fractional trading, you must round up to the nearest whole number of shares to determine how many shares you can purchase.
For example, you have $1,200 and want to invest in Apple (AAPL) stock. The current price of Apple stock is $160 per share.
Support for fractional share trading: If your broker supports fractional share trading, the number of shares you can purchase is 1200/160=7.5 shares. This means that even if your funds cannot meet the demand for purchasing whole shares, you can still accurately use all your funds to invest in Apple, thereby participating in Apple's potential growth, obtaining dividends in proportion, and enjoying the benefits of rising stock prices.
If fractional trading is not supported: If the broker does not support fractional trading, the calculation result is 1200/160=7.5 shares, which needs to be rounded down to 7 shares according to the rules. At this time, it costs $ 1,120 to buy 7 shares of Apple stock , and the remaining $ 80 cannot be used to buy Apple stock. This part of idle funds can either be accumulated and used for reinvestment together with subsequent funds; or find other stocks with suitable stock prices for investment.
Using fractional shares, you can create a diversified stock portfolio even if you only have a few hundred dollars to start with.
Choose the order type
There are many types of stock purchase orders. The type of stock purchase order you place specifies the conditions under which you want your broker to complete the transaction. Different order types have their own characteristics and applicable scenarios:
Market order: Instructs the broker to buy the stock immediately at the best available price. When the market is active and liquidity is sufficient, market orders can be executed quickly, allowing investors to seize investment opportunities in a timely manner. Market orders are a common choice for investors who adopt a buy-and-hold strategy, especially for stocks with high trading volume. For example, if an investor is optimistic about the long-term prospects of a hot technology stock and is eager to buy in to share in the company's growth dividend, a market order can enable him to complete the transaction quickly and avoid missing out on opportunities due to a rapid rise in stock prices.
Limit order: Indicates to the broker the maximum price you are willing to pay for the stock. When investors think that the current price of a stock is too high and want to wait for the price to fall back before buying, limit orders come into play. For example, if the current price of a stock is $50, and the investor believes that it is more reasonable to buy it at $45 after analysis, he can place a limit order. After that, the broker will buy according to the order only if the stock price falls to $45 or lower, helping investors to build a position at the ideal price.
Stop-loss order: Instructs the broker to execute an order when a stock reaches a certain price. It can be used to control losses or lock in profits. Suppose an investor buys a stock at $30. To prevent the stock price from falling sharply, a stop-loss order can be set to automatically sell when the stock price falls to $25, limiting losses to a certain range. If the stock price rises to $40, a stop-loss order can be set to sell the stock when the stock price falls back to $38 to lock in some profits.
Place investment orders
In the order placement interface of the brokerage platform, enter the company name or stock code, buy or sell direction, investment amount or number of shares, and you can place an order. Market orders usually complete transactions within a few seconds, and the portfolio is updated in real time. Limit orders are only executed when the stock price meets the conditions. Be sure to check the information carefully when placing an order to avoid losses due to operational errors.
Building an investment portfolio
After opening an account and becoming familiar with trading, investors can gradually inject funds into their accounts, continue to invest in stocks they like, and build an investment portfolio. When investing, you should maintain a long-term perspective and not blindly operate because of short-term stock price fluctuations. When the stock price falls, analyze whether the company's fundamentals have changed to avoid panic selling; when the stock price rises, do not rush to cash out. Pay attention to the company's financial reports regularly to understand the operating conditions, and subscribe to news to obtain market trends so as to make reasonable investment decisions.
Conclusion
For novice investors, the stock market offers abundant opportunities and potential, but it also comes with certain risks. Understanding the basics of the stock market, mastering basic stock analysis methods, developing clear investment strategies, and conducting reasonable risk management can help investors succeed in the market.
Stock investment requires patience and a long-term perspective. Novice investors should start with small investments, gradually accumulate experience, and cultivate the habit of rational investment.
