So, you’re thinking the market might be an option for you. Perhaps it already is. I’m here to disclose my own experience and offer some advice. Simple, basic concepts and ideas to keep in mind while investing.
I started with absolutely no knowledge. This is not a good way of doing… anything really. Realistically you should open a virtual stock account and trade within that for sometime. Example here (Offered by Investopedia). I personally, am very.. at times… impulsive. So i jumped right into the ring and began trading. Naturally I made a few mistakes. If you decide to take the same approach as me make sure you start with money you’re willing to part with.
Basic concepts and idea’s
First of all, when you buy a “share” you’re purchasing a small piece of company (X). You are now a “shareholder” of company (X). A company only has so many shares available on the market. Don’t be deceived by price. If you have company (A) trading at $1.00 & company (B) trading at $.50 that doesn’t mean company (A) is more valuable. There are several factors that come into play. Perhaps company (A) simply has less shares on the market. However, yes the price to get into company (B) is less.
Keep in mind, when you go on Yahoo Finance and get a stock “Quote” all you’re looking at is the last agreed trading price between a buyer and seller. It could be up to 25 minutes behind.
Many of you probably have been taught at some point by Khan Academy via YouTube. I strongly suggest checking out this link of his teachings on the market. Very easy to follow and understand. You can find it here.
Buy enough shares.
The very first stock I purchased was Emerald Health Therapeutics (TSXV:EMH). Being totally naive and super unaware I bought 15 embarrassing shares. this transaction costed me 28.44. of that 28.44; $9.99 is commission.Simply put I bought at roughly 1.52 and to break even it has to reach 1.90. This is called your “average cost”.
The moral of this story is simple. To reduce your “average cost” purchase more shares. People who don’t have much money will enjoy stocks under $1.00. I own 1100 shares of a uranium group at a cost of $250. It’s gone up 1 cent since I purchased it two weeks ago. I’m in the profit of $39.00 however this can easily flop the other-way. Penny stocks don’t have to be super risky but that’s a whole other topic.
Purchasing: Set Limits
When making purchases:
Quantity: X number of shares
Price: Limit <– set it to limit. Never use market!
Setting the limit will save you from being the one guy who buy’s the stock for 10.35 when it is trading around 10.28. When looking to purchase any stock you’ll see the “Bid” and the “Ask”.
The “Bid” is what the market is selling the shares at presently, while the “Ask’ is current purchase price. If the volume is low you will see often see a big spread here.
Price: 10.28 |Ask 10.35| Bid 10.27
In this situation setting a limit to purchase would be wise. You can set the price limit to 10.28 or 10.29. So when/if the ask is lowered only then your purchase will be finalized.
Use a strategy
Over time figure out your strategy. What qualifies a stock purchase? What criteria must be met? Allocate funds for “speculation trading” (Penny stocks) If desired. Are you investing for the long, or short term?
I think having a diverse profile is important. Having stocks in different sectors and industries that you are comfortable with. Another day I’ll bring up the ETF discussion. A ETF is an amazing alternative to stocks & mutual funds. They’re purchased through the same avenue as stocks. (Exchange Traded Fund)
Learning about guys like Warren Buffet will help you figure out your strategy as well.
I hope there is some information here that you’ll find useful. My goal is to keep things really basic & understandable. It’s getting the small stuff down that’ll determine your success. Feel free to comment below, until next time. Thanks.