how to buy shares for beginners

How to Buy Shares for Beginners

If you have not bought shares before, you may assume that the process of buying stocks is a herculean task. But stock investment is easy with an understanding of how to buy shares for beginners.

 

If you lack this knowledge, you may fall victim to little avoidable mistakes that will affect the success of your investment. So, here you'll find exactly how to buy shares for beginners.

Guidelines on How to Buy Shares for Beginners

Here are five steps on how to buy shares as a beginner:

#1. Select an Online Stockbroker

When it comes to buying shares, you have three options; buying through an online broker, a full-service stockbroker, or directly from the company. However, buying shares through an online broker is the easiest of the three options.

 

An online broker acts as a middle man between tradable securities and investors, however, they perform this function over the internet. Online brokers also provide helpful resources to their customers regarding DIY investment trading, probably one of the reasons it may be best for beginners.

 

Once you've selected a broker, open a brokerage account that you will use for your stock trading and fund it.

#2. Analyze Different Stocks and Choose the Ones to Buy

It's time to pick stocks and this will require good research. Research into different companies and find stocks that have maintained a record for good performance. You should start from companies you have observed their consistent growth over the years, probably as a consumer.

 

And, once you’ve picked these companies, find out all you need to know about them, and basically thoroughly examine their financial reports. You'll also find information about these companies on your broker's website.

3. Decide the Number of Shares to Buy

At this juncture, many newbies in the stock investment fall into the pressure of wanting to buy multiple shares at once. However, one of the best pieces of advice on how to buy shares for beginners is to start small. You can start with a single share to wet your feet and then decide whether or not you want to go ahead with it.

 

You can also consider fractional shares which allow you to buy a portion of a share. Also, in deciding on the number of shares to buy, many online brokers use tools to convert your dollars to shares. This enables you to know how many shares your money can buy.

#4. Choose Your Order Type

Order type is a vital instrument in trading, it facilitates effective stock trading and there are major types of order.

 

  • A market order is a request to buy or sell a stock immediately at the best available price.

 

  • A limit order is a request to buy or sell a stock only at a specific or a better price.

 

  • A stop (or stop-loss) order is a request to buy or sell a stock once the price of the stock reaches the specified price, after which the stop order becomes a market order.

#5. Optimize Your Stock Portfolio

Almost every stock investor hopes for success, however, you should be proactive, investments are risky after all. Optimizing your stock portfolio means adding other investments to your stock portfolio to hedge risks.

Bottom Line

Sound knowledge always precipitates success. Mastering how to buy shares for beginners is important for profitable investment in stocks.