How to Buy Shares - A unblemished Beginner's Guide

How to Buy Shares - A unblemished Beginner's Guide

Picking stocks is a lot like buying a car. When you buy a car, you can't just go with the first one that's the right color - you need to know about it. You want to check under the hood, or at least kick the tires. If you don't know about cars, you bring along your brother or your dad or man who does. Most importantly, you take your time. If you're not sure about the mileage or the sound from the exhaust you pass it up and wait for a good deal. It's no dissimilar when you pick stocks.

The first thing you need before you buy shares in a enterprise is a stock trading account. For this, you need a broker. If it's your first time, I propose using a allowance broker. This type of broker will process your buy and sell orders, and small else. Where do you go to find a stock broker? Try your bank. There might be other less expensive options, but your bank is a place you feel comfortable, and you know how it works. Chances are if you have an inventory there they can help you start a share trading inventory well and at a low cost. I trade shares using online banking.

For your first purchase, you want to buy what you know. Look at 3 companies that you like - companies you have bought things from or know population at. Pick up a newspaper and write these four things down:

Price- If the shares are 0 a piece, you might want to skip this one for now. Year's Move (Ym) - This is how much the share grew in value last year, and a fairly good indication of what the enterprise will try to beat this year. Dividend Yield (Dy) - This is a percentage of the value of each share that the enterprise pays to shareholders each year. Some shares don't pay dividends, but make up for it with more increase (if the enterprise doesn't pay shareholders it can spend that money manufacture the enterprise more valuable). Price/Earnings (Pe) - This is simply the price of the share divided by how much the enterprise made in this financial year. This form can be misleading depending on current phase of the financial year, but basically a low Price/Earnings ratio means that the company's stock is valued about right for how much money the enterprise is making.

Either that or the share is undervalued and could go straight through the roof any day now. If the ratio is high it means that the enterprise has a lot of projected growth, but small actual profits so far. This was tasteless while the "internet bubble" when companies had huge prospects but hadn't made any money yet.

Once you have these, it's time to look at some graphs. Go to the company's website, and click on "Investor Relations". Download everything, and look at graphs of their share price and dividend payouts for the last year, 3 years and 5 years.Now read the newspaper. Not the front page, the boring bits at the back about money. Most of these articles are fairly easy to read, and reading them for a few weeks will give you a pretty good idea of what's going on in the world of high finance.

Picking stocks is about more than knowing the company. It's about knowing what's going on in the world that will work on the company. Now it's time to resolve on your goals and make a buy case. First, write what you want out of your investment. Do you want to build capital over 10 years, or do you want to duplicate your money in a year, but with the risk of losing half of it? If you are the former, then you are a increase investor. Otherwise you are a value investor. You might be somewhere in between, but since this is a first buy it would be a good rehearsal to pick stocks according to a definite investment philosophy.

Now your buy case: This is an discussion for and against buying the shares. In it you need to write:

What's going on in the enterprise with regards to new business, new directors, new enterprises, new debt, new acquisitions/sales of subsidiaries etc. What's happening in the world that could work on the company's potential to make money The worst thing you can imagine happening. Think of the one thing that would make your company's stock plummet more than anyone else. As many pessimistic ideas as you can think of for why you should not buy these shares Why you think it is a good time to buy shares in this enterprise now

Lastly, before you buy shares, ask people. Ask man who works for the enterprise or ask an investment advisor, even if you have to pay them. If there is even one factor that you have not considered, your whole share trading palpate could be very painful.

Remember, buying shares is not gambling if you know the rules. Understand your risks, and don't take any you cannot afford to make. Avoid startups for a first investment - save the riskier stocks for when you are more confident.

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