Monday, June 4, 2012

Learning The Steps On How To Buy Stocks Online And Start Investing

We have covered the basic of investing and I encourage you to read the previous posts as those are the fundamentals before you start buying and selling stocks, and in this post we will be discussing about how to buy stocks. We are now going into the nuts and bolts, the actual steps that on starting to invest your money into the stock market.

At this point, you should be able to identify yourself on what kind of investor you are, as well as taken into consideration contemplating about your financial plans for your future. I have also covered, previously, a topic about choosing the good stocks to invest in, hopefully by now, you're ready with your chosen company or business where you want to buy stocks from.

Nowadays, trading is done mostly online, so we will be covering basically the steps on how to buy stocks online. If you're a beginner and have knowledge about computers and accessing the internet, you're half-way to learning to buy your first share of stocks that you are going to invest in your money.

Remember, if you're a beginner as advised, it is recommended to start in long-term investment first and work your way to a more advance and sophisticated way of investing as well as learning how to analyze the market and the company you're buying stocks from.

The Basics Of How To Buy Stocks Online

As I've mentioned, most trading these days are done online and it's convenient for both the investor(you) and the online stock broker.

Here are the steps;

  1. Decide which stocks you want to invest in.

  2. Decide how much money you're going to invest, taking consideration about your financial plan

  3. Choose a stock broker, call them and ask the requirements for opening an account. Also inquire about the necessary fees or commissions that they're asking for every trad you are making.

  4. Before opening an account with that broker, try to canvass at least 3 online stock brokers and compare their fees and the tools they have that can help you in your trading journey, not to mention, check some testimonials and reviews on each stock broker you are inquiring.

  5. Once you've decided and picked the broker you're going to signup with.. Open and account with them and make the necessary deposit if they require as well as accomplish the paper works they require, you might come to their office to complete the forms or send it through fax if they agree.

  6. Wait for your account to be activated, most of the time it is activated quickly specially if you're using an online payment system to pay all the necessary fees during the signup. If something goes wrong, don't be shy, call them and ask for support about things you're confuse.

  7. Once you're account is activated and ready, never make an actual buying or selling of stocks right away. What you need to do is, go through your online broker's platform or system and familiarize everything on how you're going to buy or sell stocks. This is very important as it will be a hassle when you start trading and you don't know the things in front of your computer monitor.

  8. Once familiar with the dashboard of the online trading system, always go with or use the trading simulator first before making your first trade. Most online stock brokers have trading simulators and this should be among the things you should be inquiring before signing up.

    Stock trading simulators allows you to buy and sell stocks but using virtual money, meaning, if you're making a mistake you're not going to lose real money, but virtual money instead. Simulators help you familiarize and setting your mindset before going into live stock trading.

  9. Now you're ready to start making a live trading. Make sure you've done your homework, choosing the stocks you want to invest in and the amount money you're willing to invest even you lose it.

  10. At the end of the trading day, whether you lose or gain, start analyzing the things that just happened, this is where you start learning the process of analyzing stocks. Perhaps on your first day of actual buying of stocks, you won't sell it immediately the next day.

    That's why before you go into live trading, you already have something in mind that you gonna hold for sometime while learning your way to day trading.
That's basically how to buy stocks online through an online stock broker. Before when the days of the internet was not yet widely utilized, conventional stock broker are used and you need to call them if you want to make an order or execution of your order. The difference with online trading is, it is done online by you(investor) through the broker's trading platform. It's faster and convenient.

Some Tips About How To Buy Stocks

Sunday, June 3, 2012

Stock Investing While On A Tight Budget

This is one thing the a beginning investor should know that when you start investing in stocks, you buy stocks from your online brokers and trade it on a regular basis. There might be a time that you just want to invest a consistent amount of money every month in stocks.

However, if you're busy with your current job or whatever it is that you're doing for a living and don't have much time to devote into actual trading, you can still invest in stocks on a regular basis. Say for example, you allocate $50 a month that you will be adding to your investment on a consistent basis.

This can easily be done through a type of mutual fund called an Equity Fund. I haven't touch the topic of mutual fund, yet, but I'm going to mention equity fund here as this is related to stock investing but managed in a different way.

Equity mutual fund is a kind of fund that is managed by professionals. Your investment portfolio is in the hands of professional investors.

Where To Get and Invest Equity Mutual Fund

Most of the time online brokerage offers such services. Talk to your online broker or if you don't have an online broker, yet, look for an online stock broker if they are offering services for mutual fund (I'll be covering mutual fund in the future as this is good investment diversification).

Basically, what an equity mutual fund does when you invest your money in it is, a team of professional investors will invest majority of percentage of your investment will be invested in the stock market. The professional investing team will go through the hassle of selecting a company where the money is going to be invested.

The rest of the money, will be invested in safe investment vehicles like bonds. However, the returns or profits through equity fund is not as big as if you're the one making the actual trading. But, it is much safer specially if you really want to go into investing but don't have much time to focus on it.

On the other hand, equity fund has the highest returns among all forms of mutual funds. Investing through this method is perfectly suited for people who are somewhat conservative but still want a decent returns from their investments.

Buying Stocks Without Going Through A Stock Broker

As I've mentioned on this post, when buying stocks one must go through a stock broker, either online or with the traditional broker. But, there is an exception to that and learning how to buy stocks without a broker is something to be done by experience investors.

A lot of the big boys of stock investing like Warren Buffet won't likely to through the broker in order to buy or sell stocks.

When buying stocks without a broker, an investor will go directly to the company whom he wants to buy share of stocks. This is direct communication between the investor and the company department responsible for handling such transaction. There are no commission fees involve in this type of transaction, unlike if it goes through a broker.

However, if you should opt on this path, you should have a good knowledge of investing, not just the fundamentals but advanced knowledge of how investing works, including the laws which are associated with it. Although, you don't need lawyers to assist you on this, but, it is a smart idea to have one, just in case some things not good may arise.

You need to read every fine print about the policy of the company you're investing in, and understand clearly what you're doing and possible outcomes in case the company goes bankrupt.

This is something that a beginning stock investor should not do. If you are planning of doing this, master first the basics and simple way of investing stocks through online brokers and progress your investing journey towards a more sophisticated and more profitable way of investing.

Sunday, May 13, 2012

What Kind Of Investor Are You

We have covered a lot of the basics of investing particular the things which are important to know before start investing in stocks or perhaps before actually trading them.

Now, we will cover the topic and discover what type of investor you are. This is an important part because discovering what type of investor you are, you can formulate good plans of attack about your investing strategy. Really, the process of buying and selling stocks isn't the same as buying toys in the mall.

So, in this post... I will show you the three types of investors and your job is to scale yourself which group you belong. Again, if you can't determine exactly what type of investor you are, ask help from your financial planner.

Investing is basically a two step process and it shouldn't be complicated, but you have to take these steps seriously to have a better chance of achieving success. The are two basic steps to investing; determine which type of investor you are and build a portfolio.

The Three Types Of Investors

  1. Growth Investors - These are the type of investors who are always aiming for growth and huge returns for their investments in the long term perspective. However, there are certain risks associated with this type of investor type and need to balanced the returns and growth of the investment. Typically, there are lots of ups and downs here, so proper mindset to tolerate certain losses is a must in favor of a higher returns.
  2. Balanced Investors - These are the type of investors who are cool and relaxed. They always want a slowly and steady growth of their investments. They're conservative but still have the eagerness to take advantage of that long-term growth, accept moderate growth and include more diversity on their investment portfolio.
  3. Income Investors -These are the most conservative among the investor types. Usually, the people belong here are those people who are investing their retirement money. They have a very low tolerance for risks and can't afford to lose the money they're investing. They prefer slow but sure returns on their investments.
Now, pause for a moment and ask yourself which group do you belong. Again, if you can't decide promptly but want to get moving, a financial planner can help. As I mentioned earlier on here, it is sometimes difficult and challenging to ask yourself and make a connection to your inner you and ask where you gonna invest your money?

Below are some suggested investment portfolio according to investor type. Literally, there are tons of ways to invest the money, but, depending on how risk oriented you are, you must choose certain investments you can opt for.

However, with simply 3 buys, you can safely invest in Exchange Traded Funds(ETF) which monitors a wide range of asset classes such as domestic and international stocks as well as bonds.

Recommended Investment Portfolio;

Growth Investor

  • 69% - Domestic Stocks
  • 13% - International Stocks
  • 08% - Bonds
  • 10% - Savings In Cash

Balanced Investor

  • 49% - Domestic Stocks
  • 12% - International Stocks
  • 18% - Bonds
  • 21% - Savings In Cash

Income or Conservative Investor

  • 31% - Domestic Stocks
  • 06% - International Stocks
  • 34% - Bonds
  • 29% - Savings In Cash

Take note that these are only suggestions and you still have to base your investment portfolio on where you are now and perhaps what you think you can.

The Fundamental Analysis Approach Of Analyzing A Company

There are actually several types of approaches or methods when it comes to analyzing stocks from a certain company or business that you want to invest it, whether it's worth going for the long term or not. The most common and widely use approaches of stock analysis are; fundamental and technical analysis.

I'll be focusing on fundamental analysis as this is the most appropriate for beginners and for long term investment. Technical analysis, on the other hand, is more geared towards experience traders and is suited for short-term investments. Day traders are always using this type of analysis on a daily basis to determine whether it is good to buy or sell that particular stocks in that given day.

Ok, let's dive into fundamental analysis and how to use it to check a company's stock potentials. We won't be using in complex formula's here to complicate things. My goal here is to provide you a clear overview on how to go about using fundamental analysis.

Basically, fundamental analysis is nothing more than checking the health of the company's financial status, how is the company's earnings going, up or down, the management, etc. Although, you can buy any stocks based on hearsay or news or perhaps tips from your stock broker, but it's good to know the basics of analyzing it so that in times when there is confusion because of too many differing suggestions, you can always opt your decision based on your own analysis and outlook.

Almost all if not all investors has its very own specific way of determining the stock potentials based on fundamental analysis. However, I will mentioned some common basis in which you can based your analysis and get started. These are the common metrics utilized ever since the beginning of stock market and being use currently by the big boys of the stock market such as Warren Buffett.

Three Fundamental Things For Analyzing A Company

  • Earnings - look for companies which consistent income and possible growth or expansion. A company that is strong and growth oriented tend to have higher market value on their shares or stocks. A company that has consistent growth and earnings for the consecutive 5 to 6 years, this is a very nice indicator.
  • Determine the future growth of the company or its future earnings - How do you gonna do this? Most stock brokers specially online-based brokers will provide tools that can do this analysis. Usually, this will be based on historical data which they have records since that company is listed as securities in the stock exchange.Check if the company has a low price earnings growth ratio compare to its competitor. Normally, dividing the PE Ratio by the projected growth rate then compare it to their competitors.
  • Strong return of equity - This is a good indication how solid the management of that company to handle cash. Will they be going to reinvest to expand the company or otherwise, this can be analyze based on its historical data and the company's balance sheet which is publicly available to its investors. A 15% return or higher is the most common benchmark or indicator that the company possess a solid and good management which has a potential to expand in the future.
Above are the common metrics you can use to get started, although you can also include metrics like cashflow, price to book ratio and dividend growth. Also, do your own detailed research about the company or business you want to buy stocks or shares from. That way, you won't completely rely or based your analysis on stock analyst you encounter in business news in TV or in newspapers.

What Is Financial Planning And Why You Should Have One

The subject of financial planning is closely related to investing. Investing without planning is like throwing a handful of rice on the wall and hope that a lot will stick. If you compare it to the financial investing, that means you gonna lose more than you make.

Investing success always entails proper financial planning. Success in stock investing can be be depended alone on market timing, picking the best stocks, tips from the stock brokers or simply hope that you gonna make more even without doing anything. Although it helps, but you need to have some kind of investment discipline and learn how to stay on course.

An investment and financial plans can be considered as road map. You must have a clear idea on how to get from Point A to Point B. Consider all your current financial status and what you want and how much you want 10 years from now. Consider your house' mortgage, education for the children or perhaps a vacation every year to your dreamed destination.

All these covers in your plans both financially and investments, so that, everything will be in proper order and you don't have to use certain money allocated to a particular thing unintentionally, and it maybe too late to realize it.

Write out your plan, specify the things you want to invest in and how you gonna carry it out to achieve that goal. It is not enough to have a plan and never writing it on paper, simply hoping or wanting huge returns.

Say for instance, it is not good enough to say or write "I want a happy retirement", it's much better to write things down on how much you can put aside monthly from now on and what you gonna do to that money in order to grow it, then when you retire you can have a good and more than enough passive income.

And, if you can't figure out your specific plans financially, you can consult a reputable financial planner. These people can come with a decent plan based on what you want and make it realistic. Let's face it, it is sometimes hard to come up with a plan specially on a financial point of view if you don't have any experience on it. Planners will ask you a series of questions and ask you squarely about certain things that can help them formulate a solid financial plan for your future.

The Golden Rules Of Financial Planning and Investing

  • Write down specific goals and make them realistic as well as achievable
  • Don't invest on anything without a purpose
  • Proper assent allocation
  • Diversify your investment, invest in stocks, bonds and even mutual funds
  • Don't get so emotional, always stick to your investing plan
  • Proper mindset
The last one I mentioned doesn't mean it's the least, it is actually important to have the proper mindset in investing. This is where you can achieve goals easily and effortlessly. Having the proper mindset, you can always stay on course on your investment plans and never have to panic even when bear market arrives.

Saturday, May 12, 2012

What Are The Different Types Of Stocks That You Can Possibly Invest In

Before you start your stock investment, first, you have to know the different types of stocks. This way, you have better choices which one would fit your investing character as there are stocks which are good for long-term investment and so for with short-term or better known as the day trading.

The common stocks traded in the stock market are;
  1. Growth Stocks
  2. Income Stocks
  3. Value Stocks
  4. Blue Chips Stock
  5. Recurring Stocks
For detailed explanations of these types of stocks, please watch the video, below. Through this you will learn which stocks you want to invest in and fits to your investing goals.

Remember, for a beginning investors, it is advise to take the long-term type of investments as it is less risky, although most of the time, this type of investments yield a low returns. Now, that does not mean that you don't want to venture into a more risky type of stocks, these are the stocks which have a potential high returns.

So, while you're just beginning, invest in long-term investment, but do a continuous research and try to learn and fully grasp the ins and outs of stock trading. This way, you can build your confidence of opting on stocks which have potential high returns. As long as you already know what you are doing, whatever the risks can be minimized.

The 5 Types Of Stocks Explained