How To Buy Individual Stock Shares
We have a selection of individual funds that offer broad market diversification. You can choose to have your retirement dollars invested in everything from a short-term U.S. Treasury security to index funds made of domestic andinternational stocks.
how to buy individual stock shares
The stock market is an important part of our personal finance ecosystem and can be a great way to build wealth and secure your financial future, but buying stocks can seem daunting, especially for beginners. There is an overwhelming amount of information out there about what to buy, how to buy and the associated risks.
Buying stocks doesn't have to be so challenging. Doing your homework, choosing the purchasing method that makes sense for you and implementing a smart investing strategy you can stick with will help you build wealth in the long run.
If you have debt, consider paying it down before you invest money in the stock market, especially if you have high-interest or variable-rate debt like an outstanding credit card balance. For many people, it makes sense to pay down debt if the interest rate is 6% or higher, according to Fidelity Investments.
In short, don't invest money that you might need within the next few years. The good news is you don't need a lot of money to buy stocks: You can start investing in the stock market with less than $1,000.
You can buy stock in any company that is public, meaning that it sells shares on an exchange like the New York Stock Exchange. That includes companies you know about or use in your day-to-day life, like Walmart and Coca-Cola. But there are also tons of companies you likely haven't heard of that could fit well into your portfolio.
Luckily, information on public companies is available online. Companies that sell shares to investors are required by regulators like the Securities and Exchange Commission (SEC) to publish regular reports about their activities, like an annual 10-K that outlines financial performance.
If you don't want to pick individual stocks, it may be best for you to buy funds. In fact, financial advisors tend to like funds versus individual stocks because you're not putting all your eggs in one basket. One company might stumble while its competitor continues to grow, so if you own a fund that invests in both companies, your loss is mitigated because you benefit from the competitor's gains.
Fund companies like Fidelity Investments and BlackRock share information about their funds on their websites. You can read through why certain shares are included, the percentage of the fund they take up and performance. For example, here is Vanguard's page for its Vanguard Information Technology ETF. You can see that the fund "seeks to track the performance of a benchmark index that measures the investment return of stocks in the information technology sector." These types of fact sheets include share prices, past performance, all of the stocks included in the fund and more.
Another way to research individual stocks and funds is via research firms. Morningstar, for example, has a huge repository of data on different funds and stocks available, as well as ratings from Morningstar's analysts.
Before you can make a stock purchase, you have to determine how you'll actually buy these stocks. There's a lot to consider, including how hands-on you want to be, and how much you're willing to pay. With big investment companies like Vanguard, you can choose to open an individual retirement account (IRA) or an individual brokerage account that you fund with after-tax dollars.
A financial advisor is a professional money expert who can help you with retirement planning, paying down your debts, tax planning and more. They can also provide investment advice. There are several different kinds of financial advisors, including stockbrokers, who trade stocks on behalf of their clients, and certified financial planners, who are regulated by the CFP Board of Standards and help clients create long-term plans for managing their money. Some advisors are fiduciaries, which means they have to put clients' best financial interests ahead of their own financial gain.
Robo-advisors are automated investment advisors. If you use one of these programs, it will ask you for information about your financial situation, investment goals and risk tolerance, then use algorithms to create a portfolio with a diversified mix of stocks and bonds.
Trading apps that allow you to buy and sell stocks, bonds, funds and often cryptocurrency via your smart phone have become ubiquitous in recent years. Robinhood, Webull and E*TRADE are popular examples. To protect your investments, make sure you're using an app that is registered with regulatory agencies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) by visiting the SEC's Investment Adviser Public Disclosure or FINRA's BrokerCheck.
If you are working with a stockbroker or financial advisor who is managing your investments, they'll likely take care of buying stocks for you. Robo-advisors also do a lot of the hard work. Usually, they ask you to tell them how much you want to invest, your long-term investment goals, time horizon and risk tolerance. Once you deposit money, the robo-advisor automatically invests that money in the market, then manages your portfolio.
But if you're using an online broker or trading app, you'll have to place the orders yourself. These trading platforms tend to have step-by-step guides on how to actually place orders once you've deposited money into your account (which can take a few days if you're connecting a bank account). While some of these platforms offer more advanced moves, like options trading, experts recommend that you master buying and selling stocks before taking on more complex investments.
The language and layout of these platforms vary, but most have some common features. For instance, you can type in the name of a company or its stock ticker (the unique abbreviation a company gets when trading on an exchange, like TSLA for Tesla), which will bring you to that company's page where you can find information like performance and stock prices, as well as a button that says, "Trade."
If you went the financial advisor or robo-advisor route, much of the work of maintaining your portfolio will likely be done for you. But if you used an online broker or trading app, you're going to need to regularly check in on your portfolio and make sure it's still meeting the goals you set when you first started buying stocks.
Diversification is a critical part of managing a portfolio. A diversified portfolio will have a mix of stocks, bonds and cash that aligns with your goals and risk tolerance. Within each of those asset classes, you should have diversification as well. The benchmark S&P 500 Index contains 11 industry sectors, and experts say it's a good idea to have stocks from a wide range of different industries in your portfolio. You should also have different company sizes and locations represented in your portfolio: large-cap, mid-cap and small-cap stocks, as well as both U.S. and international businesses. There are also different kinds of stocks to include, like growth stocks and value stocks.
If you invest solely in funds, some of this diversification will be done for you, but if you want to buy individual stocks, experts say having at least 20 in your portfolio is a good rule of thumb. A diversified portfolio ensures that even if one area of your portfolio tanks, you won't lose everything, since assets perform differently depending on market conditions.
The exact stocks and funds that will fit into your portfolio is dependent on your own financial situation, including your goals and risk tolerance. But if you're curious about some cult stocks investors can't get enough of, check out our guides below.
Stock picking is extraordinarily hard. Famously rich stock picker Warren Buffett has spent the last decades discouraging pretty much everyone not named Warren Buffett from trying to make money picking individual stocks. He says as much:
The thing is, most professionally managed funds also underperform the market. So, what are you supposed to do? Instead of picking individual stocks or giving your money to someone who is paid to pick individual stocks, you can also invest in index funds, which spread investments across a bunch of companies and try to mimic the performance of the market as a whole.
Account minimums vary considerably in the minimum investment they require to open an account. They also normally charge a fee for each stock you trade. Most will assess a flat per-trade commission fee for any stock purchase, big or small, that generally ranges from $5-$10 per online trade. If you have a small amount of money to invest, look out for a provider that offers a low minimum investments (or no minimum at all) to open an account.
(1) through diversification, by holding groups of stocks that have different reactions to market events (like from different countries or industries) and combining them in a portfolio with other asset classes like bonds or even gold. The advantage of diversification is often you can reduce risk without sacrificing expected return.
If you need money for a specific purpose in the near term, natural stock fluctuations mean it may not all be there when you need it. The most conservative will keep their money in a high-interest savings account or government bonds that will mature when the payment is needed. If you have more than you need to spend in the short term, investing in stocks or other risky assets can be a good way to try to grow your wealth and keep pace with inflation.
Dividend yield is a ratio that shows how much a company pays out in dividends each year relative to its share price. It is a way to measure how much income you are getting for each dollar invested in a stock position.
Dividend yields provide an idea of the cash dividend expected from an investment in a stock. Dividend Yields can change daily as they are based on the prior day's closing stock price. There are risks involved with dividend yield investing strategies, such as the company not paying a dividend or the dividend being far less that what is anticipated. Furthermore, dividend yield should not be relied upon solely when making a decision to invest in a stock. An investment in high yield stock and bonds involve certain risks such as market risk, price volatility, liquidity risk, and risk of default. 041b061a72