Thursday, May 12, 2016

Investment Essentials: Starting Your Portfolio

Now that you've gotten 90% done with the essentials, it's time to start thinking about starting your own portfolio. In order to start a portfolio, you will have to open a brokerage account with one of the many brokers that are available to you either at your bank, online, or at trading manager offices. The most popular however is the online brokerage because they are the least likely (in my opinion) to charge you various fees. They can also be best used through online management so you don't need to pay someone else to do any of your investing for you.

The various online brokers that are most commonly used are:




Personally, I use TDAmeritrade. The reason that I use them is that they have a low minimum account balance (I was very very broke when I first opened my account and this was a must for me), they have little to no fees (now...), and their interface is extremely user friendly. In addition, it's very easy to remember that the only fee I have to worry about is the $9.99 trade fee for each buy or sell request. I would suggest for anyone however to do your research on the various online brokerages and pick which works best for you. There really isn't a one stop shop. Different sites have different bonuses for each person. It is all situation but I would say that if you're broke (like I was), TDAmeritrade is probably going to be your best bet.

Once you've found the online broker that fits your financial situation, go to their website and click the button that says "open an account" or something to that effect. Study the types of accounts they allow you to open - 401, individual, IRA, Roth IRA, and open the one that fits your needs. Each account has a type of benefit and a limitation so choose wisely. I can't suggest one over the other because each person has a different need for opening up a brokerage account.

Once you've opened your account and deposited a starting amount of money to invest with, you can start looking into stocks through the brokerage account that you have opened. Type in the search box that is on your account homepage a ticker of a company your interested in or if you don't know what the company's ticker is, simply type the name of the company and it should list the ticker. That will take you to the company's stock page or quote page where you can see all the various statistics that I talked about previously in the other steps.

Once you've done your homework on the stock through the process that the other steps have guided you through, you're ready to buy a stock. There should be a button on the page that says "buy". If you click it, an order form or page should open where you can enter the symbol (make sure it shows the correct ticker of the company you want to buy), the action (buy in this case since you're looking to buy shares), quantity (however many shares you can afford or want to buy), order type (choose limit order instead of market order), and time in force (how long you want your bid to be up before it times out).

You'll choose limit order because it is the most effective way to fill your order. Limit order means that the online broker will only fill your order if your price that you have listed is what you end up buying it for. If you choose market order, it will simply buy shares as soon as it can find a seller and the price could be different depending on what the market is currently filling them for under the ask. Market will fill for the asking price of the seller (lowest asking price yes but that doesn't mean it's a good price you want it for). Market is faster but uncertain of price while limit is slightly slower but always the price you're looking for because it waits until your price is met on the other end by the seller.

Once you click submit after filling in the fields, if the stock is selling anywhere for the limit order you've placed, it will be filled. This of course assumes that you're sending through your order during trading hours. Normal trading hours are 9:30AM to 4PM Eastern standard time in the USA. There are extended hours but I highly suggest against trading outside regular hours because prices are horribly skewed in the hours outside of the normal hours.

Once you've submitted, you will either see it has been filled or you'll see it sit for awhile and time out if it can't be filled for the price you want. If it's been filled, congratulations, you now own your first stock! Not so hard right? Now you need only to wait for the perfect time to sell - or maybe you'll hold it forever and simply collect those sweet dividend checks if you've acquired a dividend paying stock.

I hope you've enjoyed this quick and to the point investment essentials series. There are lots of other things to know about the market but this should at least have gotten you running in the right direction. If you're still nervous about investing, I suggest that you give yourself a test run first. Get on Google and find a stock simulator website. You can make a quick account, enter in what you would have bought and wait a couple weeks, months, or years. Check back and see if you were successful. There's nothing wrong with testing out your theories on a simulator -in fact, I recommend it!

Take care and send me any emails you want if you have anything to add or have any suggestions for the next series that will review more items but in far greater depth.

Closing tip: avoid purchasing REIT's and MLP's until you better understand how they may be handled as they are handled differently with your taxes.

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