Starting Out in Investing, Part 2.

So here you are. You’ve spent hours researching company after company, reading all the material you could handle and have made your decision. This is exciting stuff—there’s a certain feeling of empowerment that comes with being a shareholder. You’ve entered a world that very few people can afford to live in, and you should be proud of yourself. However, this is no time to stand around and pat ourselves on the back. You know who you want to invest in, now is the time to start thinking about the next question: WHEN to buy the stock.

I’m not breaking any news here when I say that stocks go up, and stocks go down. If you’ve gotten this far, surely you’ve heard (or read) the old adage “buy low, sell high”. It’s perhaps oversimplifying things a little, but the message is something that is worth following. You don’t want to be the person who buys a stock when it is at its absolute highest, only to have it gradually (or rapidly) decline and see your investment shrink along with it. Of course, determining a stocks’ high and low points is incredibly difficult—if not impossible—to do. So, what to do?

When you have identified a company that you want to buy stock in, you should start “following” the stock price. Basically just keep an eye on the up and down movement of the stock from day to day, week to week (yes, it could take weeks to get to a good buying opportunity). After a while, you will start to get a feel for the ebb and flow of the stock price and should be able to pick a good spot to enter, ie: your target price. If you’ve followed a stock for 2-3 weeks and found that it tends to range between $20 and $24, then you should be trying to by shares when they’re at $20, not $24. Again, this is simplifying the process and you utilize charts to assist you in predictive the movement of stock prices, but the premise itself is the same: buy low, sell high.

At this point you’re probably wondering if I’m ever going to recommend going ahead and making the purchase. Well, we’re almost there. During your monitoring period, you should also spend some time researching the various online stock brokerages and decide which one is best for you. Generally speaking, you should be looking to sign up with a company that offers the lowest-priced trades possible. If you’re planning to open an account with tens of thousands of dollars right up front, then this might not matter as much to you—often times the companies offer discounts and perks for clients with large accounts, much like banks do. However, if you just want to start out slow and try to build something, you won’t want to pay $25+ extra every time you buy or sell a stock. This is typically what the banks will charge, so I would recommend steering clear of them.

We have reviewed several of the more popular online brokerages here on BestStockTraders, and I would highly recommend taking some time to see if any of them are right for you. Regardless of you who you sign up with, the important thing is to do it while you are monitoring the stock price activity of the company you’re interesting in buying. This way, once the stock hits your targeted buying price, you will already have your account ready to go. Another benefit of signing up in advance is that it will give you some time to familiarize yourself with the functionality of the site and figure out how to use it. Everything takes a little getting used to, so use this time to get comfortable with the platform so that you are ready to strike when the moment is right.

The moment is just about here, and the excitement is building. You are finally ready to make your first stock purchase. Check out our next article: Making Your First Stock Purchase for a few final thoughts on how to maximize your profits.

About BestOnlineTraders

The goal of BestOnlineTraders is to help new investors get off on the right foot. We don't claim to have all the answers to all the questions, but we feel like this site is a great place to start out if you are new to investing. The stock market is a complicated, intimidating entity, complete with complex terminology and calculations. As a new investor, your goals should be to get a grasp on the basics--the fundamentals, if you will. This is what we offer our readers.

There are many sites out that that are packed with information. The problem is that for the new investor, this can be information overload and overwhelming instead of educating. Start slow. Read our introductory articles, browse our online trader reviews and you'll be off to a good start. You will then be ready for more thorough discussions of the more complex aspects of investing, and we have some excellent links right here to help you.

Thanks for visiting, and good luck!

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