Purchasing Your First Stock

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If you have never purchased a stock before and you are not sure where to start this post will help you do your first stock purchase. There are a few things you will need to get in order as you start to seriously consider investing like how you even purchase a stock. But do not worry there are steps you can follow to do it right and this article will cover them. These steps are not difficult and once you have completed each one of them then you can repeat this process again and again.

Open a Brokerage Account

The first you are going to make sure is you have a brokerage account to trade in. It is similar to a checking account and this is not a complicated process to set up. Brokerage accounts are usually found in three main styles: a full service account, a discount account and an online account. The differences are pretty clear, when you dig in basically full service brokers they will do the trade for you like in the old days and they are going to charge you a lot of money to do that. I highly suggest you avoid them due to the high cost. Then discount brokers will also do that for you and help you walk through what you are doing in place of trades but to be completely honest most online brokers have customer service lines that will help you do all of that and there is no extra cost. So just go with the online broker.

There are some really well-known companies you can turn to for this option like Vanguard, Charles Schwab, and Fidelity. These platforms have one of the lowest cost and maintenance fees for you in terms of investing in the stock market. After selecting a platform you can choose to set it up online or just call the customer service and somebody is going to help you open an account.

Choose a Business to Invest

Once your account is set up you will have to fund it to be able to trade. The balance that you put into your new brokerage account is going to sit like a checking account in cash until you tell them to invest that in a specific thing. What that means is when you are ready to invest, you just log into your account, look up the stock ticker or symbol of the stock (i.e. Apple’s stock symbol is AAPL, Microsoft’s stock symbol is MSFT and so on) and you decide how many shares you want to purchase. You do that by dividing the amount of money you want to invest in that stock by the purchase price (the price per share). Let's say you are going to take about 10% of your $100,000 capital and put it into one chosen stock. To do that, you are going to divide the number of the dollars per share into $10,000 and that is going to give you a number of shares you want to buy. In some cases there is going to be a commission for doing the trade, that is the fee for doing the trade, so pay attention to that amount as well. Most of the brokerage platforms including those that I’ve listed above do not have any fees on purchasing a stock.

Look at the Ask Price

The last thing you need to do when purchasing a stock is to look at the ask price for the share you are submitting to buy on the trade. Most of the time when you have chosen a trade you are going to see two prices: a bid price and an ask price. The ask price is going to be higher than the bid price. The bid price indicates the maximum amount that a buyer is willing to pay for a share of stock while the ask price represents the minimum price that a seller is willing to take for that same security. So when you are buying shares of a company, the ask price is what you are basing your purchase on. At this point you have figured out how many shares you want to buy. You may have to round that out to a full number since most of the platforms do not allow to do a partial share trade.

Reinvest Dividends

Before we wrap up, I want to share a bonus tip with you. After purchasing shares, even a single share, do not forget to enable automatic reinvestment of dividends. Most established companies pay out dividends on a regular basis and it is a really smart idea to enable investing those dividends back into the company which shares you have purchased. It will enable even higher long term returns for you and ensure your financial future.

That is basically it, it is really that simple! You can do smaller trades to get a hang of it and practice before investing larger amounts. Most big platforms like Vanguard do not charge any fee for purchasing shares, so you are free to do as many transactions as you would like.