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You are here: Stocks Investing Guide >
Stock Market Information > Buying Stocks |
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Buying Stocks
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You can buy shares of
stock, bonds or mutual funds direct from a broker,
or you can open an account with an online
brokerage, paying by Paypal or credit card. You
usually have to make a minimum initial deposit,
and fill out forms with the brokerage to cover
things like beneficiaries in case you die with
your investments intact. When you open an account,
you will want to be conscious of things like
set-up fees (I'm against them) and broker
commissions.
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You can still buy shares of stock like Grandpa and
Grandma did, having actual stock certificates issued to
you, and keeping them in a safe deposit box or maybe in
the freezer for safekeeping. In this case, the stock is
listed in your name, and the drawbacks are that you have
to keep track of the papers yourself, and if you want to
sell, you have to mail or take the papers to the correct
place, which takes more time than it needs to. Most
people leave the stocks listed under the brokerage,
"held in street name". You can access your funds for
trading with a phone call, and your stocks will be
insured by the federal government in case your brokerage
goes bankrupt or in case of fraud.
We talked about dividends earlier. When dividends come,
they will either be held in your general account until
you tell the broker what you want to do with them, or
they can be automatically reinvested. Your broker will
send you monthly statements that show where your money
has gone in purchases, commission and fees, how many
shares you owned at the time of the statement, and the
value of your shares. But, remember, brokers are in the
business of selling, so you will also receive preferred
customer offers—everything from life insurance to credit
cards.
Buying shares of stock can be inexpensive—the going rate
online is $7 a trade. But stocks themselves may cost a
pretty penny—look at Wal-Mart or Sirius! Some stocks can
be bought from the individual company, but you may
prefer to invest in a mutual fund where there's no
minimum purchase required after whatever it takes to
initially open your account. Stocks that come
recommended by friends and family are usually not the
good picks you hope they will be: you can and should
learn to get the best price you can for a stock by
limiting broker's fees and by not believing everything
you read on the Internet. Don't believe a company's
current image, which is controlled by publicists;
believe what it has accomplished in the past. Don't
believe the photo on the prospectus that shows happy,
well-fed people laughing because the company's products
have made them so happy. Believe the stocks section in
the newspaper that shows the day's rise or fall in
price; believe the history of a stock, which is based on
facts.
Everyone hopes to buy a cheap stock which will then take
off and make buckets of money, and sometimes that
happens, but more often you buy a mid-priced stock which
rises moderately year after year, eventually earning you
a tidy sum. If you can't come to terms with the idea
that your stock will rise and fall daily but that you
need to keep it for years to really earn the profits,
you may be more comfortable placing your money in bonds.
A bond comes to maturity in a certain, predetermined
period of time, and at that time, it's worth a
predetermined amount of money. Bonds usually don't pay
as much as the stock market earns because they are very
low risk: you get what you pay for. For some people,
watching stocks move up and down is a crazy-making
experience; their stomachs go to pieces with worry. For
these people, a nice, sturdy bond is a better
investment.
Whether you want to buy stock in a Canadian gold mining
operation or the latest in chipotle salsas, there's
someone who wants to sell to you. That's one of the
biggest problems of the stock market: there's no
stopping people who think it's thrilling to make
investments that are risky.
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How to stick to a household budget
and have extra
money for investing
1. Customize your budget with your current needs, wants and future goals in mind.
2. Try to think if your budgeting plan as a "spending" plan rather than penny pitching.
3. Sit down and rationally discuss budget goals and spending limits with your spouse. You are bound to disagree somethere, but it important to take the time to find common ground.
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Stocks & Investing Advice
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