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With GameStop, AMC Theatres, and Blackberry stocks stirring up excitement, it might seem like a great time to jump in on the action. While that’s definitely true, it’s not for the reasons you think.
Learning how to invest in stocks online is not a way to get rich quick. Instead, it’s a great way to put your money to work for you over the long term. And online brokerages are making it easier than ever before by rolling out web trading platforms with truly user-friendly interfaces.
So, while you probably want to skip the overly hyped stocks, it’s still a fantastic time to learn how to invest in stocks online — and this guide aims to help. Here’s how to proceed.
Your first step in learning how to invest in stocks is picking your online brokerage.
You have many excellent options to consider, like:
A popular option for beginning stock investors is Robinhood since it has an informative interface and is easy to use.
Before you choose one of those options, you will want to browse reviews for each of these companies to see which ones speak to you most. Then, sign up for an account by following the on-screen prompts on their website.
Depending on your selected online brokerage, you may have to wait up to three days for them to set up your account and allow trading. In the meantime, you can link your bank account to add funds to the trading platform.
This is good to do early since certain platforms, like Charles Schwab, do not allow you to buy stocks until your funds have settled, which can take up to three additional days. Robinhood and similar platforms may allow you to instantly start trading up to a set limit while waiting for your transfer to process.
You are barred from day trading, however, unless you have $25,000 held in your trading account or use cash only trading with settled funds. Depending on the platform, you may complete up to four day trades in a single week before they temporarily lock your account and issue a warning.
Although the GameStop debacle turned a tidy profit for a fortunate few, many people ended up holding the bag because of their poor timing and lack of due diligence. By buying well after the hype hit full swing, they purchased the stock at the top only to watch it fall fast in the coming days. To avoid that scenario and bolster your retirement fund with help from the stock market, you need to do some research into each company before buying their shares.
While practicing your due diligence, you will want to look at:
Also, seek out their shareholders reports and see what they have to say about their direction and future.
Once you have that information in hand, reflect on how the company might fare in the changing landscape in your community and beyond. If you think that green energy is a sure bet, then you might want to invest in electrical cars, wind turbines, and the like.
After you decide which companies you want to own stock in, compare the price of their shares to your budget. If you have your heart set on owning stock in a high-value company, think about getting fractional shares for the time being. Jot down how many shares you would like to buy for each company before moving onto the next step.
Using your list of ideal companies to invest in and the total number of shares you want from each one, you can start putting in your orders. If the stock market is currently open, you can issue market orders for immediate fulfillment.
A market order serves as your request to buy the indicated number of shares for the current price. If anyone has sell orders out, your order will go through right away. Avoid submitting a market order after hours since it won’t go through until the next morning and the price could be much different at that time.
If you want to put in an order after hours or prefer to get the stock at a certain price, make a limit order instead. When making this order, you tell the system not only how many shares you want, but the highest price you’re willing to pay for each one. Then, it will process your transaction as soon as someone is selling shares that meet those parameters.
After your market or limit orders go through, your shares will show up in your portfolio. You can monitor their value using the platform’s interface any time of the day or night. Some platforms even have apps you can use for monitoring and transaction purposes.
You may need to change the settings to see the data in real-time, however. Some platforms, like Fidelity and TD Ameritrade, have a 15-minute delay set as default, which can hinder your ability to make on-the-fly decisions.
Overall, it’s often best to let your investment simmer and grow, especially in companies that you’re proud to support. Unless you notice negative changes on the horizon, companies with a solid foundation and bright future are likely to have shares that grow in value over the years.
You can protect your investment by setting up stop loss and stop limit orders that trigger sale of the stock if it starts dropping in price. To set up those orders without losing big money in the long run, you need to figure out what you’re willing to lose in hopes of a future upswing.
You may need to consult with experts or do even more research to figure out the base valuation of each stock in your portfolio. If the stock drops a certain percentage below that figure, you can have the system automatically sell your shares to prevent dramatic losses. This is often a highly personal decision you will need to weigh heavily before deciding exactly when to sell, if at all.
You can study for years without learning all the answers to your questions about investing and online trading. So, take it slow with just a couple stocks to learn how to navigate through the platform, limit your losses, and even see your money grow. If you’re not comfortable with that, you can work with a broker who will manage your investments for you.