Trading and investing in stocks is becoming increasingly popular, as it provides freedom and the opportunity to create both a main and additional source of income. From the very beginning these may be one-time purchases, but after gaining the necessary experience there is a need to create a professional trading account for convenience and expansion of possibilities.
Where should an individual start buying shares and what steps will lead to their first income on the stock market?
Buying shares: who, when and why
Shares are a type of security that allows its holder to make a profit under certain circumstances. But not always. By purchasing shares, a private investor can become a shareholder of the company and possibly have a say in the company’s decisions if their securities have voting rights. But for important decisions you need to have a controlling stake, which is not available to ordinary traders.
Private investors choose securities in order to make money on them. This can be done either by changing their price or by the company paying dividends, if provided.
Where to start buying shares: algorithm of actions
The set of actions required to purchase shares will depend on the strategy, the exchange on which the investor wants to buy securities, and financial capabilities. However, there is a general plan.
- Decide on a strategy: investment, dividend or speculative. The choice of the shares themselves, the exchanges on which they are traded and the brokerage company will depend on this;
- Choose which exchanges you want to trade on. It also opens up opportunities or imposes limitations. To purchase inexpensive American securities, you will need access to US stock exchanges through an international broker. In addition, these securities may have significantly different profitability potential;
- Make a choice of brokerage company. To invest in shares, it is necessary that the broker provides access to the desired exchange, but for speculative strategies, a company that provides access to trading CFD contracts is suitable;
- Open an account. To do this, you need to collect a package of documents and contact the broker’s office. In some banks, this can be done online, and verification can be completed only by indicating agreement with the offer agreement and providing a passport and bank card details.
And the last thing is installing a trading platform. Many brokers have mobile applications for trading, but, as a rule, a trading terminal is installed on a computer to make trades online. This is done in a few clicks.
How to buy stocks correctly?
The main thing in buying shares is not the transaction itself, but its profitability. To do this, you need to carefully select securities for your portfolio. The first thing that will help an investor or trader here is analysis. For long-term investments, it is worth focusing on assessing fundamental factors in order to understand the prospects of the company. But it is recommended to find the best price for purchase with the help of a technical one.
Money management is just as important as stock selection. It is important for a novice trader or investor to study what part of the capital can be allocated to transactions, and what is better to leave in reserve for balancing the portfolio, whether to use a margin loan, or buy shares without leverage, without setting stop losses.
