How to Invest the Stock Market

By Johnny Kampis

  • Overview

    Investing in the stock market is something that should be done carefully and only after plenty of research. If you want to buy stock you will need a broker, and you have a few choices, from full-service brokers to discount brokers and online brokers. The more you pay , the better the service you will get. Below is a guide on how to find a broker and then invest in the stock market.
    • Step 1

      Seek out one of the full-service brokerage firms if you are willing to pay more for sound investment advice. Top firms include Merrill Lynch, Smith Barney, Morgan Stanley and Edward Jones. The cost to purchase stock through these firms is generally a commission based on a percentage of the sale price, and will vary from brokerage to brokerage (see Resources below).
    • Step 2

      Look for a discount broker if you just want to trade stock, but don't want to pay the extra cost of investment advice. Popular brokers of this sort include Fidelity and Charles Schwab. Costs are usually around $10 to $20 per trade or a percentage of the purchase price.

    • Step 3

      Go online for the cheapest stock trading costs. You will usually pay $10 to $15 a trade if you set up an account at a site like E-Trade or TD Ameritrade (see Resources below).
    • Step 4

      Learn important terminology when trading stock with your broker. If you place a market order, you will buy the stock at the price at which the stock is trading at the time of purchase. If you want to set your own price, you can make it a limit order in which you only buy the stock if it is at the price you are willing to pay. A limit order can be set to be open indefinitely.
    • Step 5

      Set a stop-loss order after buying a stock if you want to reduce your risk. This move will keep you from losing too much money on the trade by unloading the stock if it drops to a certain price. If you set your stop-loss order not very far below your purchase price you risk selling the stock during a temporary dip so choose this order carefully.
    • Skill: Easy
    • Tip: To get a report on a broker, call the National Association of Securities Dealers at (800) 289-9999, or visit the website of the broker.

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