If you need to buy a new pair of socks, go right to the socks aisle in the supermarket. However, if you want to acquire a share in a promising company whose stocks can be found on a stock exchange, read these efficient recommendations we have developed for you.

How to Acquire Stocks?

Even if you have a fat wallet stow full of bucks, and come to the Facebook headquarters in Merlo Park to offer your money, you are rather to be taken to the asylum than to make your banknotes work for you. To learn about you as a potential stock acquirer, most companies will prefer you to contact a registered individual broker or a brokerage. Mind that brokerage is a generally recognized term used to denote any entity authorized to acquire stocks. So, for a start, contact a financial planner or a human stockbroker. Now, ready to invest in stocks? Read further to learn how to do it.

What are the first steps of investing in stocks?

It may sound strange but to start investing is pretty easy. You need just three things:

• A reliable broker who can make a trade;
• A sufficient amount of funds to acquire the investment, and;
• A distinct idea what exactly you want to acquire.

We are not sure that we can help you with the funds part, but we are definitely confident how to cover another two corners of the stock investment triangle. The easiest way to acquire stocks is to find an appropriate platform or a broker for making a trade. You can succeed in any financial area, but you are likely to appreciate the simplicity and minimal expenses when investing online.

At the moment it is important to make the right choice of what to acquire. What can it be? You can focus on an individual stock, a mutual fund, and an ETF. Your choice depends on your personal needs and preferences.

Investing in Stocks – Where to Start?

Goal-oriented and cost-conscious investors who do know what they want are highly recommended to make use of services provided by online brokers, especially the ones who offer fee-free trading. Automated investing services are a rather cheap and convenient way of investing. Human brokers and financial consultants are characterized by a high level of services quality, but at the same time their services are the most expensive.

Mind that it is extremely difficult to acquire stocks. It is impossible to learn the future stock price.

During his last decades Warren Buffett, a famous stock picker, persuaded everyone he knew from making money by picking individual stocks. He stated that a non-professional or his helpers on his behalf should not aim at picking winners. Instead, he should own a number of businesses that are sure to succeed in total.

Thus, it is up to you to decide who can give better advice: the simple-hearted Yoda owning $81 bln or a crowd of Redditors proclaiming a stock as “must purchase/can’t lose”. As for us, we follow the old money-bag: smart investors diversify their investments in stocks. Let’s speak about this in more details.

Acquiring Stocks Online – How?

There is nothing easier than to acquire stocks online. The use of an investment platform or an online broker is the best way because it is simple and cheap. In order to sign up, you need to indicate your home or work address, your main phone number, and a social insurance or social security number. Fees differ and depend on a company. However, you can also find investment platforms that offer zero trading fees or no account minimums.

It is important to realize that by their nature stocks are volatile. It means that their price can headily rise and fall. When acquiring any kind of stock, whether this is an individual stock or a mutual fund, you must always remember about an absolutely true disclaimer stating that past high results do not guarantee future succeed. Historically stocks were more effective than conservative investments (e.g., government bonds) because investors obtain a reward for large losses risk.

Acquiring Stocks without a Broker – How?

You can acquire stocks directly from large companies like Adidas through DSPPs (direct stock purchase plans). Although nowadays it takes minutes to open a brokerage account online and fee-free trading is available, there is no reason not to make use of brokers.

The investors who are brave enough to invest in stocks often make profit of their readiness to rely on the stock increase, but, certainly, they also risk losing a part or all their investments. Everybody is sure to have heard about risks and rewards. Investors expect a financial reward for an increased loss risk.

The person’s tolerance of risk means how much he/she can afford to lose. For instance, two persons are thinking of investing $1,000. In a couple of years one of them will need funds for purchasing real estate. The other one has $1,000,000 in her checking account, and instead of investing he/she would spend this $1,000 for another brand watch. It is obvious that these two people have different risk tolerances, and the first one who needs money for purchasing real estate would better keep his/her money on a savings account in a reliable bank offering high interest.

Ways to Reduce Risk

Diversification is the most efficient way to reduce any risk. In terms of finances, this is the ownership of a large number of stocks in many economic areas. How does it work? If one stock or even one area suffers a rapid decrease, this will make up only a small percent of the whole portfolio.

If one day the price of the Coca Cola stock decreases because of low quality raw materials used for production, you can lose only 1/100 of your portfolio instead of ½.

One of the simplest ways to extend your presence on the markets is to acquire both national and international ETFs (exchange-traded funds).

ETF are traded like individual stocks but many of them contain up to hundreds of stocks. You can purchase only one ETF and control a part or the whole economy of the state. This option is much better than to put all eggs in one basket and focus on several stocks.

Making Money on Stocks – How?

There is no more reliable way to make money on stocks than to purchase a magic ball that predicts tomorrow’s stocks price. It is a very good option to hold them for a long time. This period is often called a time horizon.

Those investors who have a short investment horizon – for example, three-five years – must be extremely cautious when investing in stocks. If you need funds for a certain purpose in the near future, you must keep in mind that natural fluctuations of reserves may mean that you will not have enough funds when you need them. The most conservative investors still prefer to make money by keeping funds on a savings account or investing in government bonds.

However, according to various studies, those who are ready to wait for 10 and more years are likely to be rewarded with high profits, which compensate short-term risks. This is a vivid lesson on how average indicators finally wash out the stock price outliers (that can be both good and bad). It means that the longer you hold a stock, the more changeable its price will be on average.

Stocks are never absolutely safe, but the shares held longer are definitely safer.

Investing in Stock Market – When?

The best day to start doing something is today. Investing in stocks is not an exception. In fact, there is no ideal time for entering a stock exchange, but, as you can see, the longer you invest, the most probable it is that the stock will be highly profitable.

If you know what kind of stocks you are going to acquire, the easiest and cheapest way to buy them is to use online discount brokerage. You can open an account within ten minutes if you have a home address, your employer’s address, and a social insurance or social security number.

Minimum amounts on the account considerably differ depending on minimum investments required for opening an account. Besides, each traded stock is charged. Most of them determine a fixed fee for a trade, regardless of its size. As a rule, this is from 5 to 10 dollars per online trade. If you have little money for investment, search for a helper who offers a low minimum for opening an account. Some of them do not require even minimum investments to open an account.

Most brokerages employ people trading, but they charge much more if you need to use them. Last time some providers of investment services offer fee-free trading. That is why every cent you pay is included in your investments in stocks rather than given to brokerage.

Acquiring a Fraction of a Stock

A lot of world-wide known stocks, e.g., Amazon, are available only for rich investors. Some tech stocks are traded at the price of $1,000 per each. However, it does not mean that you can own at least something. There are new services that make it possible to purchase fractional shares.

Nowadays some services offer gift cards and fractional shares. In spite of this, ETF is still the best way to acquire a fractional share. Investing in ETF consisting of stock, in fact, you own fractional shares. ETFs are investments containing large investments from various shares to bonds and real estate. ETF are traded on the stock market. That is why to buy a unit is as simple as to buy a share in a company.

Acquiring Stocks with Little Money – How?

The ownership of stock is not a prerogative of only rich men any more. Even if you do not have enough money for a share in your favorite company, many brokerages do not require any minimum deposit for opening an account. They offer mutual funds and ETF that let you immediately enter the stock exchange.

Investing in Stocks – Basic Tips

Nobody but investment gurus like inventing regulations. Some of these rules are certified trash. However, there is one useful known as the 5% rule. According to it, the appropriate diversification means that no investment or sector should be more than 5% of the whole investment portfolio.

Do you want Facebook stock? Perfect! But it should not be more than 5% of your portfolio.

Do you want to get involved in fashion? Cool! But only 5%.

Keep in mind one note. Since, as a rule, ETFs and mutual funds contain many individual shares and sectors, you can hold more than 5% of your portfolio in one mutual investment fund or ETF. Or you can still follow the 5% rule.

Trading Stocks – How?

Online brokers trade intuitively. As a rule, you press the exchange button, enter the stock ticker and the number of shares for selling or purchasing. Some brokerages ask whether you want to trade immediately, at the end of the trading day or as soon as the stock has a certain price.

Acquiring Stock – What to Focus Attention on?

It is difficult to pick stocks. It is so difficult that, according to most studies, even professionals who are paid for stock picking cannot outperform the market over the long term. These are the reasons why.

You intend to acquire a stock. You are smart and can analyze the obtained information. You have to buy stock from someone. This person can also be smart, and he owns the same information as you do. If he violates the law and involved in insider trading, he can have even more information. Let’s say, this person decided to sell shares at the price of $10 per share, because it is sure to decrease. As for you, you decided to but it at this price, because you are sure that the price will rise. Who is right in this case? How much are sure that you have correctly analyzed the available information and synthesized it better than all other investors? What makes you so special?

That is why to purchase stock is the same as to purchase a pair of shoes that is worth $1,000 at $300.The supply and demand law enabled the market to work out all its special price discounting magic. All information the market is aware of is put in the stock price, including, revenues, growth, and historical prices.

There are two principal ways to earn on stock. Firstly, that’s when the company outperforms the expectations of the market. Secondly, through ERP (equity risk premium), the percent over the risk free-rate or the current interest rate you can get when investing your money in risk-free government bonds. Over the long term, investors are rewarded for accepting risk and the increased risk should be simultaneous to the increase in the potential reward. This concept holds the vitality of the stock. If it was not expected that the stock price would outperform the risk-free rate, investors will use safe money and the stock price will decrease.

However, if you understand the nature of risks, there is nothing bad about spending a percent of your portfolio to one share. You can use mobile applications that enable you to trade shares without any fees.

You can check out whether you have a talent in picking stock. Put down reasons why to purchase stock, but do not buy them. Wait for the determined time and of the share moves the way you predicted for the reasons you indicated; you can add some adrenaline to your investment game.

Terms Used in Stock Market

If you want to expose yourself on a stock market, make sure that you understand the terms used by brokers. This is a list of basic terms to learn before you acquire your first stock.

Revenue growth

Public companies are obliged to quarterly state their financial status to the public. Is it more profitable this quarter than the previous one? The graphs that contain revenue numbers at various stages of the company operation show whether the company is on a flat trajectory, upward or downward. The line that is stably going upwards is a perfect indication of the company’s growing success.

Historical price

It is quite natural that the older the company, the more information must be used to estimate the company’s general condition. If the company managed to survive under unfavorable economic conditions, the decrease in the sector or any other business catastrophes, and the price of its shares increased, the company is definitely managed correctly.

Earnings per share

What are earnings? These are the amount of money the company has after paying all its public bills. EPS (earnings per share) is the amount expressed in US dollars divided by the number of shares sold by the company. The higher earnings per share are, the better it is. This may result in the increase in the shares rate. However, it can be not that easy, because companies are known to purchase own stock to decrease the number of outstanding stock and thus to artificially increase its EPS indicators.

Price/Earnings Ratio

Price/earnings ratio (P/E ratio) is a number that can be calculated for any public company. At the same time, it is the most wide-spread way to assign relative value to stocks. All you need to do is to divide the current price of stock by the earnings per share value of the previous four quarters. The obtained number will show how much investors are currently ready to pay for each dollar of the annual earnings. That is why it is often called the price multiple. The average P/E ratio of 500 companies is 15. The lower number can indicate the under-estimated company. The higher number indicates the over-estimated company.

Dividends

There are some companies that offer dividends representing them as special program on sharing profit for investors. Every quarter investors obtain a certain amount of US dollars that has nothing in common with the price of stock. (At the same time the company management can take a decision on decreasing on increasing the amount of future dividends to be paid depending on the company’s financial state). It can be quite useful to learn about dividends programs, because in some cases the dividends the company pays can be as high, or even higher than you can earn by keeping your funds in a savings account. (Keep in mind that unlike bank accounts and interests, stock price can decrease and dividends programs can be ceased). Monitoring the regularity of paying or increasing dividends by companies is one of the indicators of their health and future profitability of their stock.