How to Buy Stocks The Easy Way For Beginners
So how should you go about learning how to buy stocks in the stock exchange? The first thing you need to do is to open up an account at a brokerage.
A brokerage is a firm who acts as an intermediary between you and the stock market.
You tell them what stocks you want and how much you're willing to pay for each stock, then you pay them a fee and they carry out the transactions for you.
So now that you have a brokerage account, you need to fund it.
You can do this through so many ways it is crazy (they do want your money).
Anyways, the three most popular payment methods that you can pay by are check, credit card, or wire transfer.
Once you have funded your account, it is time to have some fun.
With your newly established account you can now purchase stocks, securities, mutual funds, or other brokerage offerings.
For the purpose of this article, we'll examine the stock exchange purchase.
The most important part of buying stock on the stock market is thoroughly researching it.
What you're basically trying to find is how much the company is worth in relation to how much these small shares of it are selling for.
In your research, you will want to find a few principle figures, namely the stock's intrinsic value, which is found by comparing the calculating the future income of the stock and comparing it to the present value of the stock.
The second figure you will wish to know is the ROIC, or return on invested capital.
You are basically looking to find out if the company is generating cash and how efficiently the cash is being used.
If a company makes one million dollars in cash and spends most of it for upkeep, that isn't very efficient, if however that same company reinvests a portion of that money, which formulates to a better ROIC.
These two figures alone won't spell out the answer for you in regards to buying stock in the stock market, but they'll get you started.
I would like to introduce you to a final concept of how to buy stock on the stock market.
This concept hinges more on you, your confidence and competency as an investor.
The concept is that of a safety net.
The safety net concept fluctuates widely among investors.
Some prefer a wide (safer) net, others prefer more chance.
The choice is ultimately situational and very personal.
I like a safety net of around 10%-11%.
What is a safety net though? To explain this, I will use the imaginary company Foadco, their value is 5% under priced on the street.
Foadco's "safety net" is about 5%, another example is Microsoft in the early 1990s, their stock soared way higher than the company's worth, and this represented a very negative safety net (meaning you will lose a lot of money by buying this stock.
A brokerage is a firm who acts as an intermediary between you and the stock market.
You tell them what stocks you want and how much you're willing to pay for each stock, then you pay them a fee and they carry out the transactions for you.
So now that you have a brokerage account, you need to fund it.
You can do this through so many ways it is crazy (they do want your money).
Anyways, the three most popular payment methods that you can pay by are check, credit card, or wire transfer.
Once you have funded your account, it is time to have some fun.
With your newly established account you can now purchase stocks, securities, mutual funds, or other brokerage offerings.
For the purpose of this article, we'll examine the stock exchange purchase.
The most important part of buying stock on the stock market is thoroughly researching it.
What you're basically trying to find is how much the company is worth in relation to how much these small shares of it are selling for.
In your research, you will want to find a few principle figures, namely the stock's intrinsic value, which is found by comparing the calculating the future income of the stock and comparing it to the present value of the stock.
The second figure you will wish to know is the ROIC, or return on invested capital.
You are basically looking to find out if the company is generating cash and how efficiently the cash is being used.
If a company makes one million dollars in cash and spends most of it for upkeep, that isn't very efficient, if however that same company reinvests a portion of that money, which formulates to a better ROIC.
These two figures alone won't spell out the answer for you in regards to buying stock in the stock market, but they'll get you started.
I would like to introduce you to a final concept of how to buy stock on the stock market.
This concept hinges more on you, your confidence and competency as an investor.
The concept is that of a safety net.
The safety net concept fluctuates widely among investors.
Some prefer a wide (safer) net, others prefer more chance.
The choice is ultimately situational and very personal.
I like a safety net of around 10%-11%.
What is a safety net though? To explain this, I will use the imaginary company Foadco, their value is 5% under priced on the street.
Foadco's "safety net" is about 5%, another example is Microsoft in the early 1990s, their stock soared way higher than the company's worth, and this represented a very negative safety net (meaning you will lose a lot of money by buying this stock.
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