how to buy stocks online

I have stock accounts at 3 different brokers (E*Trade, Ameriprise Financial, and Merrill Lynch) and I must say that my favorite by far is E*Trade. Why do I have three different accounts? My Merrill Lynch account was set up for me in the 80′s by my father, I set up my own account at Ameriprise in the early 90′s, and my E*Trade account was set up as my first online account about 8 years ago.

At the time I put my first dollars in E*Trade, they were one of the pioneers of online brokers and I felt they probably knew what they were doing more than anyone else. The online investing world was relatively new and I wanted to go with one of the leaders. They still are a leader today and I have never regretted it.

Price

I get all my stock trades for $9.99 and while I can get cheaper trades elsewhere, it is just not worth it to me to change because I don’t trade too often. Their price has always been $9.99 as long as I can remember and I get good value for that because I LOVE their website and how easy it is to navigate.

Website Usability

When you are choosing between E*Trade and other online brokers, you will find that one of the biggest differences between all of them is their platform website. For instance, I absolutely hate my Ameriprise account because their website is NOT user friendly. I can never figure out how to get from one place to another and I don’t like the way they display things. It’s like Ameriprise hasn’t thought about how best to present the account information and they have never changed anything to make it better.

E*Trade on the other hand, is a dream to navigate and it takes very little time to figure out where everything is. When you first log on, it will have your account(s) displayed right in front of you and all you have to do is click on them to take you to a screen that will show you every stock in your portfolio. You will immediately see how much each of your stocks went up or down for the day along with some other basic information. Everything about their website is simple and “user friendly” which is just the way it should be.

Real Offices In Many Cities

Another thing I like about E*Trade is that they are big enough (publicly traded on Nasdaq – symbol ETFC) to have real offices in many major cities. Unlike some of the discount brokers that only have websites, they have a brick and mortar office in my city and I went there a couple of times when I wanted to add money to my account. I was able to hand a check directly to a broker and talk to him as well.

You can of course add money to your account by mail or by wire but I like the fact that I have somewhere to go if I have any real problem or complaints. I have also dealt with them on the phone from time to time regarding account issues and always found their customer service to be great. They even have online customer service chat so you always know someone is there 24/7.

Research, Investing, and Trading Tools

Once you open an account you will have access to a full array of research tools that rival that of any online broker. I don’t personally use them too often but you probably will find all you need. Every stock you look up will have a section for analyst research, fundamentals, earnings (complete with graphs) and a section listing insider activity.

With E*Trade you also get a section that has about 25 videos covering different online investment topics. There are also periodic live web seminars that you have to sign up for that do NOT cost anything extra.

If you think you will want to be buying stocks on any of your mobile devices there are apps for the iPad, iPhone, Android, and Blackberry that allow you to trade on the go.

Bottom Line

E*Trade is one of the original online discount brokers that started the whole website stock trading revolution. In my opinion they have the most solid website experience and that is extremely important for me as I do log on to my account just about every day to see how my stocks fared. I feel confident having my money with them because of the responsive customer service I have always gotten and their price is right in line with most everyone else. Right now E*Trade is offering free trades for the first 60 days if you are a new customer so it is a good time to give them a try!

You hear the terms “overbought” and “oversold” bandied about mostly when stock analysts are trying to make a case for you to either buy stock or sell a stock. Simply put, overbought means what it sounds like: people have been too enthusiastic about a stock and pushed it to too high a level. Conversely, oversold means people have become too pessimistic about a stock and sold it to a level where it is now under priced.

The one thing that I want you to get out of this article is that these two terms are total judgement calls by the person making them. There is no technical analysis that can really say that a stock is overbought or oversold. I may think a stock is oversold and you might disagree because you might think things are better with the company than I do. Its my opinion vs. your opinion.

See the chart below of the last three years of Netflix (NFLX). This is the best example of a stock that shows possibly being both overbought and then going down so far so fast that it becomes oversold (my judgement).

Netflix was in the news a lot in 2011 as the stock went from about $50 in 2010 to just over $300 in about a year and a half. It was a hot stock that was shorted furiously by many investors as they believed it was not worth anything near its valuation. Yet it kept going up and eventually they were proven correct that it was overbought.

The steep sell off in 2011 brought it from it’s highs all the way back down to about $60 a share in a matter of months, prompting some analysts to say that they then thought the stock was oversold. Yes, they said, the sell off was warranted but not to the degree that happened. Since then, from it’s lows the stock has now climbed back to about $100.

The terms overbought and oversold help to illustrate how the stock market is at least partially influenced by people’s emotions. When Netflix was going down, people panicked and couldn’t sell fast enough. They just wanted out no matter what. I’m sure many people sold with this frame of mind until it got to the point in the $60 dollar range where enough people started to realize that maybe the stock had gone too low and was oversold. Emotion and panic often are responsible for stocks that go up and down too fast.

It is great if you can find stocks that you think are overbought (if you like to short) or oversold if you want something that has a good chance of going up. Oversold stocks can be good short term money makers because they are at a level where most of the risk has been taken out. However, as I mentioned up top, making the “oversold” or “overbought” analysis is a judgement call on your part or someone else’s.