If you have never bought shares of stock before, then this is for you. You really want to invest in the stock market. Making a little money while you’re at wouldn’t be a bad thing either. So why haven’t you bought any shares yet?
Do you think you don’t have enough money? Maybe you’re waiting until you read every investing book on the planet. I bet it’s probably because you’re scared of things going wrong…and there’s nothing wrong with that. Here’s how you start.
Buy One Share
I remember the first real trade I ever made online. The reason I say it was the first real trade was that I had made tons of paper trades before putting any real money in the market.
It was an option on Sears Holding Company SHLD (ceased trading in June 2019). I watched and waited for the right time to enter into the trade. When I finally got the signal I was waiting for, I felt like a cheetah stalking prey on some nature documentary. My heart started racing so fast as I was about to hit the buy button. You would have thought I was about to launch a nuclear missile.
What a lot of beginning investors don’t realize is how much emotions plays a role in what you buy and sell. Not only can it affect what you buy, but it can also affect if you place a trade at all.
Whatever reason has kept you from placing your first trade, here’s a way to make it as painless as possible. Just buy one share of stock. The quality of the company doesn’t really matter so much for this exercise. You’re not trying to pick the next Microsoft, you just want to hit the buy button for the first time.
Just One Week
Now don’t freak out. This is probably the only time you will hear me tell you not to worry about how well the company is being run or what the chart looks like. What I’d like you to do is pick a stock you’d like to buy within the next seven days. Find something trading for less than $10 a share. You could even find something for less than $5 if that makes you feel more comfortable.
OptionsXpress was bought by Charles Schwab and all accounts were converted into Schwab accounts. OptionsXpress has ben converted to their Street Smarts Edge platform which is tailored more towards options traders. The below info was before they were bought out.
If you haven’t opened up a brokerage account, there are many to choose from. I’ve been using OptionsXpress since I began to trade in 2005. They are not the cheapest in every area, but when I have issues and needed to speak to someone, I have not had problems getting in touch with a person. They have been the only online broker I have used so I can’t really recommend any others.
Every online brokerage nowadays is offering pretty much the same thing. The only things that will differ are the tools and features that you will have access to and the fees they charge to place trades. Do your homework and pick a firm that you think will work best within your needs. And if you don’t like them after you’ve tried them out, you can always open an account with another firm.
Pick a firm for now and get the account opened, so in a week you will be ready to place your first trade.
Each time you place a trade to buy a stock (or any other financial instrument for that matter) you will be charged a commission. You will also pay a commission fee whenever you decide to sell. The fee is charged regardless of how many shares you buy or sell.
If you’re trading in the U.S. you can expect to pay under $10 per trade to buy stocks. At OptionsXpress they charge $8.95. So all together you can expect this one trade to cost less than $20 if you pick a $10 stock.
Don’t think of this as a waste of money. Choosing a $5 stock would only bring your cost to around $15. This is a very small price to pay to help get you past the crippling fear that can hinder you from even attempting to make money from the stock market.
Set It and Forget It
Once you have your brokerage account opened and your stock selected, you are just about ready. All you have to do now is to buy one share.
I want to emphasize the significance of doing this in one week. Procrastinating will only keep you where you are. Look at your calendar right now. Yep. Open your phone or your laptop, pull out the one on your desk or just get a sheet of paper out and find out the date that is seven days from now. Put in a reminder to yourself that you have to buy your first stock.
The simple task of putting it on your calendar will make you that much more likely to follow through, which I know you want to do…and so do I.
The Moment of Truth
So after all of this, how do you actually buy your first stock? You’ll need log into your brokerage account that you will have opened by then.
One quick note before I go any further. You will of course have to deposit money into the brokerage account before you can make a trade. Most will allow you to send funds via your checking account. I know for sure OptionsXpress allows you to mail in or drop off certified funds. You will have to check with the broker you choose to find out their particular polices.
If you’re using OptionsXpress here is how the order screen will look. From the your account overview, hover over the Trade tab on the top menu. You will notice a drop down menu. From here click on Stock under the Asset Type. This will bring up the order screen where you can place your stock trade.
Here is where you will enter the ticker symbol for the stock you have chosen. Don’t know the ticker? You can also use the find symbol link next to the drop down menu to find the ticker as well.
If you aren’t sure of the ticker and you don’t happen to be on OptionsXpress, you can look it up really easily on Yahoo Finance. Just type in the name of the company and the ticker will be listed next to the name.
I’ll add a few final tips about placing your first stock order below. You need to make sure you enter in the trade correctly so that your order gets filled the way you want.
First make sure you are on the Stock portion of the order form. For the Action portion you want to pick ‘buy’ from the drop down menu. You’ll pick the ‘sell’ action when you are ready to sell the share.
The quantity you will enter is just 1. Be sure that the ‘shares’ option is checked as well. Next under price, you can just select ‘market’. This simply means your stock will be purchased at whatever the current market price is at the time you place your trade.
The other order options will be discussed a later time.
The Duration only has one option for this trade, day order. Leave the routing set at ‘default’. For now you will also leave the ‘advanced orders’ set to none.
After you have everything, set you can select ‘preview order’. This will bring up a screen that will summaries what order you are about to place. It will tell you what asset (in this case a stock) that you are about to buy, how many shares, the price of the asset and the commission you will be charged.
If you are placing the order outside of the normal trading hours of 9:30am to 4pm Monday through Friday, Eastern Standard Time, you will get a warning that your trade will be placed when the markets open on the next trading day.
It’s up to you whether you place the order when the market is open or not. If you choose to submit the order when the market is closed, the one share you are buying won’t be purchased until the market is actually open. In this case, the price of the stock can be different that what it is when you submit your buy order.
After you have confirmed the preview of the order, the only thing left for you to do is hit the ‘place order’ button.
And that’s it. You have bought your first stock.