Before buying your first stock, you should take some time to learn a few things about stocks and the stock market. Most people today are using an online discount broker such as TD Ameritrade, eTrade, or other brokerage companies like Goldman Sachs and Morgan Stanley found on Wall Street. One of the first things to know about a company before you invest is how that company makes money.
Investing in a company without knowing how it makes money is a sure way to your money in that stock. Some companies sell products while others are service oriented. Manufacturing companies do not generally perform as well compared to service oriented companies. Of course, this is dependent on many factors, including economic cycles and individual fortunes.
Research the Company
Next you should know if the company you are buying stock in is operating in the domestic market, the global market, or both. Companies with global presence have advantages and disadvantages. They are offering their services to a wider range of markets. This can help stabilize their income if one country has a poor economy. On the other hand, they are subject to laws, regulations, supply chains, and market forces from a much greater number of areas.
The selling price of the stock is important to known. You would be surprised to find how many people are buying stocks with no knowledge of how much money they are paying. You need to know what sector of the economy the company is in. It’s important to know if the company is technology-based, such as Intel, an automotive company like Ford, or retailer like Wal-Mart.
This is important because success in trading stocks is often based on how well the sector performs, rather than how well a particular company performs. If the entire retail market goes down, shares of a retailer like Wal-Mart shares will also go down, even if Wal-Mart has a clean balance sheet and is making money.
Buy Your First Stock
After analyzing the above factors, you are ready to buy your first stock. You are going to need to known the ticker symbol before making a stock purchase. The stock market lists all traded companies trading under a ticker symbol. Early in your trading career, it is always a good idea to place limit orders, not market orders. Limit orders will ensure that you do not pay more than what you want.
Buying your first stocks can be an intimidating event. Be sure you do your homework before making a purchase. Don’t invest more than you can afford to loose. Don’t put out a third mortgage on the house because you got a “hot tip” from your doctor. Be smart, start out conservatively – as you gain experience and confidence, you will be more comfortable trading in more “risky” areas.
