How to Buy Stocks Online for Beginners

Learn the Basics of Buying and Selling Stocks Online

Over the years I have made a lot of money trading stocks on line - but like many of you beginners out there - I started out with very little money to invest. Here is a brief blow by blow of how I started to buy stocks online as well as some tips to help you start making money fast rather than slow.

One caveat: Investing in any asset carries risk of loss - so don't trade with your rent money!

Rule #1: Don't Invest Money You Can't Affort to Lose

The stock market moves in haphazard ways and there is no way to guarantee the profitability (moment to moment) of trading positions. It is therefore imperative that you do not put money at risk which you may need in the near term (for rent, mortgage payment, car payment, etc.) - because there is always the possibility that your stocks will lose all of their value - or enough of their worth to cripple your finances. That said, let's get started!

What You Need to Start Trading Stocks Online

3 Things Required to Begin Buying Shares

We'll delve into each of these topics in greater depth below but basically there are 3 things every beginner needs in order to buy their first shares of stock:

1. An online trading account
2. Seed investment capital (a.k.a moolah, money, etc.)
3. A stock you want to buy

Where to Get an Online Trading Account

Finding an Online Stock Broker

There are a lot of terrific online brokers out there today - and choosing from any of the leading companies most likely won't make or break you but - if you have limited capital to start - then you need to get the most bang for your buck. That means you need to shop around for the lowest commissions broker. This will reduce the amount of transactions costs for each trade - making it easier to make money on smaller trades. This is critical for beginners just starting out.

Capital Requirement (Money) Needed to Begin Investing

How Much Money Do I Need to Start Investing?

This question can be a little tricky - because the answer depends a lot on the broker you selected, what your investment horizon is, and how much income you need to make off these investments. Given you are just starting out and trying to decide which stocks to buy odds are you are not starting with a lot of money. Having said that, my rule of thumb is to try to buy stocks in blocks large enough to be able to trade them profitably including the damaging impacts of transaction costs, commissions, spreads, and taxes.

That may seem like a mouthful (and it is!) but if you can understand how trades eat into your profits you will better know how to avoid the transactions fee traps and / or choose different assets where you can put your money to more efficient use!

I try to invest of blocks of at LEAST $1500, and preferably $2000. If you can't come up with at least this amount of capital you should be looking at other types of lower capital investments.

Rule #2: Managing Stock Trading Transaction Costs

Here's a Rule of Thumb on Transaction Costs -
Each Time You Trade You Owe Two Commissions (one to buy, one to sell), Plus Taxes (on Gains), Plus Fees (SEC fee for selling). Figure on the Following Each Successful Trade:
Commissions: $10 total minimum
Taxes: 28% of Gains
Fees: Usually Nominal for Beginners / Small Capital Amounts

Try to Invest in Amounts Such That Your Transaction Costs End Up Less Than 5% of Your Trade.

How to Decide Which Stock to Buy

Asset Selection Is Critical to Trading Profitably

This is the toughest part of making your first investments. Which stock is the right one for me to buy? Do I simply buy some Apple stock because it's the biggest brand? Should I maybe buy Coca-Cola because that is a company Warren Buffett likes?

The answer ultimately depends on whether you decide (at the time of purchase) whether the company you buy represents a good value. Committing to buy a share (or block of shares) of stock is the last (and hardest) hurdle to overcome.

My advice? If this is your very first stock purchase, why not pick a stock that pays a dividend (some income), is a brand you recognize (and like), and is trading modestly below its 52 week high (information all readily available in your local newspaper stock listings). Examples might include Coca-Cola (KO), Verizon (VZ), AT&T (T), Johnson & Johnson (JNJ), 3M (MMM), etc.

Companies like these won't go belly-up overnight, will pay a little income from time to time, and offer a little room to grow (if you picked them up nicely below their 52-week high).

Stock Market Tutorials for Beginners

Titles from the Experts on Stock Market Investing

Below have a look at what some of the leading authors have to say about taking your first steps in the equities market. See what wisdom the leading investing minds have to say about stock ownership today.

 

Other Beginner Trading Tutorials

Video Tutorial Series on a Variety of Investing Topics

These video tutorials will help you go a long way in understanding strategies to make money trading stocks and other assets. Here are a couple of short videos which help traders with little money get more buying power (and hence more profit potential) from their limited starting investment capital.

• Learn to Trade Stock Options - Learn the basics of trading stock options - puts, calls, and leverage with this informative video series.
• Binary Options System - Learn how binary options work and how they can be an incredible resource for traders with little or no money to start.