How To Buy Stocks Online For Beginners

How To Buy Stocks Online

It is easy to learn how to buy stocks online and I will show you how

WHY I USE E*TRADE AS MY ONLINE DISCOUNT BROKER


I have stock accounts at 3 different brokers (Merrill Lynch, E*Trade, and TD Ameritrade) 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, my E*Trade account was set up as my first online account about 10 years ago, and I set up my own account at TD Ameritrade last year just to try them out after reading the great reviews they got. But in the end, E*Trade is still my favorite.

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.

Account Safety

One thing I REALLY like about E*Trade is the feeling of security I get knowing that it is virtually impossible for someone to log in to my account. With every account you get an optional FREE digital security ID (see picture below) and you use it to access your account. The number on the ID changes every 60 seconds and you have to add that number on to your password to get into your account. You also get optional SmartAlerts that you set up to automatically inform you of any account activity. Bottom line: I know my online account is super safe because no normal person will be able to hack into my account without some super hacking ability.

 

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, wire, or electronic transfer 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 to 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 plus up to $600 dollars if you put in qualifying amounts so it is a good time to give them a try!

SHOULD BEGINNER INVESTORS DIVERSIFY?



It is hard to find any reputable money manager, financial planner, or stock broker who wouldn’t recommend diversifying your assets. Your stock portfolio should generally have a variety of stocks in different industries and this is so that you avoid putting all your eggs in one basket. Putting everything in one stock, one industry, or just a few stocks can be very risky and lead to big losses should those stocks go down.

But, is there any time when diversifying is NOT recommended?

In The Beginning, You Don’t Need To Diversify (as much)

I would say that for any beginner just starting out buying stocks with limited funds or with only a small amount to invest, it is not as important to diversify. Please understand that “limited funds” and “a small amount to invest” is subjective because beginners might start with varying amounts of money and not everyone has the same income or savings.

Lets say you have $1,000 to put in the stock market. Every stock you buy will cost you $9.99 in fees on both ends of the transaction (when you buy and when you sell) if you use E*Trade. It will cost similar amounts with other brokers. While the fees aren’t very high, they are high in proportion to the amount of money you have to invest. In that scenario, if you choose to split your $1000 between 5 different stocks, you will be paying $50 to buy those stocks and that is 5% gone right off the top. Then it will be another $50 to sell those stocks when that time comes. You are spending too much of your principle just to diversify. 

Personally, if I only had $1,000 to $5,000 to buy stocks with, I would put it all in one stock or two at the most. Then, as I saved more money, I would wait until I had another $3,000 to $5,000 and buy a different stock with it. I would keep buying a different stock each time I saved enough to warrant another stock purchase. $1, 000 to $5,000 is a relatively small amount of money for many people but it might not be for you. This is only an example but if you are working and have the ability to save money, it is smart to keep putting money in the market whenever you can throughout your life.

Please remember: You should never buy stocks with money you need or know you will need in the near future. If you absolutely can’t afford to lose the money you want to invest, you should NOT be buying stocks with it!

As Your Portfolio Increases, So Should Your Diversification

The purpose of diversifying is for safety. You want to, as much as you can, protect your invested dollars in case something unforeseen happens. Not everyone has the same investing goals or risk tolerance but for the average investor who is saving for retirement, spreading your money between a handful (or more) of stocks is safer than having it all in one stock.

The more money you have, it is easy to see that the need to protect it increases. If you just have $1,000 it might be no big deal to lose most of it but if you have $100,000, you are most likely very interested in keeping it pretty safe. As you grow older, accumulate more money, and have fewer years to invest it before retirement, your portfolio’s diversification should increase.

But in the very beginning when your investment dollars are small and presumably more easy to recoup, don’t overthink diversification. Get your money into one stock at a time using an amount of money you feel comfortable with.

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