Are you thinking to start investing in the stock market and want to know how invest stock and how to buy stock, then you are in the right place. I guide you step by step process.
If you look at the history of billionaires they continuously invest in stock market for a long time term. It is is one of the most profitable ways to build wealth over the long term. Before jump how to invest stock you must know basic details on investment.
What is Stock
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A stock also called shares or equity are securities that represent an ownership share in a company. When you buy stock in a company, you are called a shareholder because you share in the company’s profits. A company listed stock to raise money and it comes in two types—common or preferred. Common stock entitles the stockholder to a proportionate share of a company’s profits or losses. Preferred stock, meanwhile, comes with a predetermined dividend payment.
what is share market
A Share Market is also called a Stock Market where Stocks are bought and sold timely by Traders, Small investors, institutions, Mutual fund Companies. These transactions have to conform by government regulations which are meant to protect investors from fraudulent practices. The most famous stock exchange are Nasdaq, New York Stock exchange, Nifty, Sensex and many more.
what is stockbroker
A stockbroker is a professional who executes buy and sell orders for stocks and other securities on behalf of clients. There are two types of Stockbroker, One is Full-Service Broker and another is Discount Broker.
Full-Service Broker: Full-service brokers are mainly traditional brokers, where they provide to their clients to offer retirement planning help, tax tips, and guidance on which investments to buy or sell. But they demand an amount from your investment as a commission.
Discount Broker: A Discount Broker primarily works to help you place orders to buy investments at a very low cost. They allow you to do it yourself at minimal cost through their website and offer support online, by phone, or in a branch.
How Invest Stock
Step1: Open a Brokerage Account
As I already explain to you types of brokerage account and work of brokerage account. It is up to you which type is best for you. If you already retire or near to retire or don’t want to handle the complex “stuff” like managing your wealth in a tax-efficient way then a Full-Service Brokerage account is best for you.
Before Choose a Brokerage account you must compare, who provide Little or Zero Commission account, What type of features are Provide, Is Stock Chart Platform is good for you or not.
|Fyers||Brokerage:- Rs.0/Delivery, Rs.20/All Other Segment||Open Account|
|Upstox||Brokerage:- Rs.0/Delivery, Rs.20/All Other Segment||Open Account|
Step2: Select Stock You Want to Invest
Select a Stock is depends on how many days you want to invest in a stock. In general investment in the stock market is 3 types. Longterm investment, Short term, and Intraday.
In longterm investors once buy a stock you carry stock for more than 1 year. For this, you must research company background, management, annual reports, order details and many more.
In the short term, investor carries stock for more than one month to one year.
In an Intraday trader, you can’t carry stocks more than one day means today buy today to sell. It doesn’t matter you are in profit or not you must sell it.
In Full Sevice Brokerage firm provide some stock suggestion depends on the time frame. On my suggestion it is better you study some stock and invest in it.
Step3: Decide how many stocks to buy
It completely depends on you how many quantities of stocks to buy, no one pressure on you. If you start to invest newly in the stock market it is better to start with small quantities. Don’t think that invest all money in a single stock, If the stock price is double then your invested money also double, it happened, but what if that stock not performed well and the price goes to half, then you lost a big amount of money or maybe lost all money.
Always remember to start with small and invest timely or Price dip or as per your Technical and Financial Analysis.
Step4: Choose Stock Order Type
Before start buying stock need to know what are different orders available to buy a stock.
In Market Order, your buy or sell order is triggered at the best available price.
Ex- If you place buy order 100 stock on XYZ stock, stock available 50 stock on 100.10 and another 50 on 101. you buy a stock at 2 prices whatever price is available. same on sell-side also.
In a limit order, your buy or sell order is executed at a particular price that price you place at the time of order.
Ex-One stock current price 100 and you want to buy at 102. till stock not reached 102 your order is not executed.
Stop or Stop-loss order
A stop order also referred to as a stop–loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order. A buy stop order is entered at a stop price above the current market price.
Stop Limit Order
Stop–limit orders are a conditional trade that combines the features of a stop loss with those of a limit order to mitigate risk.
You may find some other different order provided by your broker. but these are basic.
After choosing a stock, Investment time frame, type of order, and quantity of order then place your order.
Investment in stock is not a simple task. The main work is choosing the right stock for your investment. Other things are managed by a Stockbroker like placing an order, investment platform. Whatever I try to explain how to invest stock is a piece of very basic knowledge. I hope you find your solution what you searching for. If you love this article share it with your friends and family on social media.
Frequently asked question
How much money need to buy a stock?
It depends on are you, investor or trader. If an investor buys 10 stocks on $100 then need $1000. If you are a trader as I mention the stockbroker provides a good amount of exposer you start with $10.
How can I buy stock on my own?
There is two way to buy stock through a broker easiest one and you can buy direct through the company.
What is the cheapest way to buy a stock?
You buy stock cheapest way through a discount stockbroker. Most discount brokers provide research on stock, daily report and some other feature like a full-service broker. so they apply less commission.
What happened after buying a stock?
If you sell a stock after buy you have two cases either profit or loss. let’s say you buy a stock at $10, sell at $20 you are in $10 profit. If stock fall to $5 and you sell at that time, your loss $5 as simple.
How many stocks should I own?
There is no thump rule that much stock you must have. between 10 to 20 otherwise, it difficult to manage your portfolio.
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