What’s ahead can make you rich.
In fact, we can think of nothing that’s made more folks richer, quicker.
It’s requisite Know-How… No. 2 in our series on 12 skills every person must master.
Do it right and your money will grow, your Liberty will flourish and your stress will plunge.
Making money tends to do that.
The crazy thing, though, is that this isn’t taught in schools.
It’s a crime. Everybody must know how to buy shares of a stock.
It’s one of the most common questions we get in the mailbag.
“I’m new to all this,” folks say. “Where do I get started? How do I buy my first stock?”
Five Steps to Wealth
While the process is intimidating, it’s not hard. We could make our next move in less than 30 seconds. In fact, we could even do it in the car (with somebody else driving, of course), on a boat or even in a plane.
Most folks will tell you there are four steps to buying a stock.
They’re wrong… there are five.
The first step is perhaps the most daunting. But don’t worry… you need to do it only once.
The days of getting on the phone and giving your stock order to a person are largely over. Everything can be done online. You just need to pick an online broker.
There are many to choose from. Look for one with the lowest fees and, if it’s an issue, a low minimum deposit requirement.
We do our short-term trading through Robinhood, which offers free trades. But we keep our long-term portfolio within TD Ameritrade. It charges $6.95 per trade and has no minimum account size.
Two other good choices are Ally Invest, which charges $4.95 with no minimum account size, and Vanguard, which will make your trades for $7 and also has no minimum.
Setting up an account isn’t hard. It takes just a few minutes. If you can set up an email account, you can set up an online brokerage account.
The hardest part is linking a checking or savings account with your brokerage account. It’s not necessary, but it’s quite handy.
Step two is the fun part… determining what stock to buy.
That’s the topic of many, many more essays (and, largely, our life’s work).
We won’t get into it this morning, but obviously the stocks you buy are quite important to your overall financial health.
The other variable – the one most folks don’t pay nearly enough attention to – is how much of a stock to buy.
That’s step three.
For most folks, if they like a stock, they’ll buy a lot. If they’re a bit skeptical or nervous about its potential, they’ll buy fewer shares.
It’s vital your portfolio is balanced properly.
When in doubt, buy a small amount.
Once we know what stock we want, how much of it we want and who will make the order, most folks will tell you it’s time to enter the trade.
That’s not the case.
There’s a vital step they’re missing.
Remember, we don’t buy a stock to hold it forever. Eventually, we plan to sell it and cash in our gains.
But few folks bother to think about their selling strategy – step four – until after they’ve bought the stock.
It’s silly. It’s like burying your money in the ground and never pondering how you’ll get it back out.
Most investors make the mistake of selling on a whim. An earnings report may spook them out of a stock. A big spike may induce them into cashing in their gains. Or they might sell after they’ve doubled their money.
All are fine… if they are part of a larger plan.
That’s the key. Know why and how you’ll sell the stock before you buy it.
Once you do, it’s time to make the move… step five.
That’s when you log on to your broker’s site and enter a few key data points. You’ll need the stock’s ticker symbol, how many shares you want to buy and what price you’ll pay.
There are a couple of options for that last one, but we recommend setting a limit price that’s good for the day.
This simply means you determine the maximum price that you’ll pay for the asset. If the stock trades lower than that price during the day, your order will be filled. If not, the order will be canceled and you’ll have to enter it again the next day.
Start Today… Buy This
Truly, buying shares of a stock is easy. Even if you’ve never done it before, you could be wrapping up your first trade just a few minutes from now.
Like we said, the hardest part is determining what to buy.
We’ll save you that step today.
If you’ve never bought a stock, here’s a good one to buy.
Go to Robinhood’s website or download the app, set up an account, and buy just a share or two of General Electric. Its ticker is “GE.”
When you do, you’ll own part of an American icon for less than $10 per share.
But you’ll also own something else… something far more valuable.
You’ll own a critical skill that all of us must master.
Nothing is more important to your Liberty than having the Know-How to invest for yourself.
If you’ve never bought shares of a stock… tackle it today.