Tips For Investing in Stocks

Tips For Investing in Stocks

Most people thought that investing in stocks and mutual funds is only for the rich. In fact many people think they don’t have enough knowledge or money to invest. But the truth is that this is not the case. By signing up with an online brokerage firm such as ShareBuilder.com and Scottrade.com you can tread softly and successfully  into the stock market. This is because, unlike a full-service brokerage firm,  these  online brokerage firms will provide you with a low fee or cost structure that you can afford. Besides, they typically provide access to tools to help you determine when to buy and sell as well as extensive research and analysis on stock performance over a given timeframe.

Here are a few tips that will help you to make money in the stock market.

Use the Right Online Brokerage Firm

Broadly, for someone with little investment experience and money, it is best to use online brokerage firms like TD Ameritrade and ShareBuilder. This is because they do not require any account minimums. Besides, their fees per trade is small – about $9.00 to $9.99(see table 1). You should, however, consider using services such as  Charles Schwab, Merrill Edge, and TD Ameritrade if you would like the option to pay extra for broker-assisted trades. These companies have a network of branches where you can hire a financial adviser or talk to someone about your stocks. Note that different brokers offers different investment options. While some of them offer wider selections of stocks or mutual funds, others may be offering bonds, certificates of deposit and exchange-traded funds.

Table 1- Popular Online Brokerage Firms

Brokerage Firm	Trade Price	Minimum Initial Investment
TD Ameritrade	$9.99	$0
ShareBuilder	$9.95	$0
Scottrade	$7.00	$500
Merrill Edge	$6.95	$0
E-Trade	$9.99	$500

                     

Be Conscious of Your Safety

It is best to use a brokerage firm that is a member of the Securities Investor  Protection Corporation (SIPC). You can verify this from the SIPC  website which is at www.sipc.org.  To find out if there have been a disciplinary actions on your brokerage firm, you can check its background with your state’s securities regulator or with the Financial Industry Regulatory Authority(www.finra.org) . The rule of thumb here is to avoid brokerage firms that has bad records at these agencies. One more thing: be wary of emails purportedly sent by your online brokerage firms attempting to collect information such as financial or personal data. In addition, always install updated antivirus software and firewalls in your computer.

Select the Right Stocks

It is better to pick low-priced stocks from companies with a healthy cash positions(or low debt ratios). The secret: First, select companies with low-priced stocks. Next, examine the company’s balance sheet. If the company’s current assets exceeds its current liabilities, then the stock passes the litmus test and you should  buy it. Otherwise, don’t buy it.

Don’t Expect Too Much – Be Realistic!

You should keep stories of overnight riches from stock market out of your mind. Stock investing is not like that. Making money in the stock market takes time – it involves a slow, smart and steady approach to stock investing.