You know why you should save your money, open a bank account and how to find a stock, but one thing is missing: how to open a brokerage account? This is important because it is how you actually buy stocks. Here are three quick and easy steps how to open a brokerage account and place an order to buy a stock. Consult a broker for more information.
Step One: Finding a Broker
A broker is a service. They stand between your stock and you. Depending on the company you are going with as your broker, the minimum opening balance and deposit fee is different. The minimum deposit can range anywhere from $0.00 to $2,500.00. That is one thing to look out for, make sure the minimum amount is an amount you can comfortably hold in your account.
Next, you need to know the fees the broker will charge you. You want to make sure that your broker’s fee is low. For any investor, but especially a young investor it is important to have a low commission or fee when you buy and sell stocks. For example, if you want to invest $100, but the commission fee that your broker charges are $10. You just lost 10% of your money. Normally, the commission fee range from $5 to $10, the lower the better. Some examples of commissions, Fidelity and Schwab charge $4.95 and Ameritrade charges $6.95.
Step Two: Signing Up
Opening up an account will require a few things. Here is the average list, it may change depending on the service:
- Social Security Number or Tax ID Number
- Your Address
- Employment Status
- Drivers Licences
- Annual Income or Net Worth
- Date of Birth
Step Three: One Click Away
Now that you have your account, you get to the best part of investing, buying a stock! Most broker’s websites are set up the same way. First you have to find your company that you’re investing in, which is what this book (hopefully) taught you. The website is pretty self explanatory. Walking through it, it should have you fill out the ticker symbol of the company, whether you’re buying or selling, quantity (number of shares) in which you are doing so, and your order type.
Depending on your order type, it changes the conditions of your purchase. This can be a little tricky. Your options are Market Orders, Limit Orders, Stop Orders, Stop-Limit Orders, and Trailing Stop Orders.
WIth most things in investing, the simplest is usually the best. The two simplest are Market Order and Limit Order. A Market Order means that your broker will buy or sell your share(s) at the best possible price during the business day. For most large, well known companies with many millions of shares traded each day Market Orders will be the simplest for the investor. For more information visit Investopedia.
Next is Limit Order. Limit order is best selected when you are aiming for a certain price and the speed at which your shares are purchased or sold does not matter as much. The good part about a Limit Order is that you get to set the maximum price that you are willing to pay, and then you wait to see if your broker was able to fill your order. For more information visit Investopedia.
Next there is the duration list. This tells the broker how long your order will be valid.You have two options here, GTC (Good ‘til Canceled) and GTD (Good ‘til Date). Good ‘til Canceled means the order is open until you cancel it. Good til Date means that the order is open until a specified date in the future.
After you place your order, remember to check the order status to confirm that your trade went through at the price and amount you expected.