buy and sell stocks
buy and sell stocks
If you want to buy and sell stocks, you need some help from a stock broker. There are two broad categories of brokers to choose from which are the full service broker and the online broker. This article “How to buy and sell shares” will tell you how to use these options to trade shares correctly, in addition to the direct purchase plan for shares that entitles you to obtain shares from some public companies directly.
Where do you buy stocks?
Shares are listed and traded on exchanges and authorized places where buyers and sellers meet. Brokers are also members of the exchange and use their access to buy and sell shares on your behalf. Major stock exchanges in the US include the New York Stock Exchange (NYSE) and Nasdaq.
Smaller companies with less liquid stocks can trade on the less regulated trading platforms such as the popular OTC Pink Sheets. The stocks of these companies are often more volatile and risky, so investors who choose to trade in the OTC market should put more time and effort into doing research and understanding the risks.
Buy stocks with a full-service broker
A full-service broker is what people imagine when they think of investing, i.e. a smartly dressed businessman, talking to clients from his office. These are the traditional stockbrokers who will take the time to get to know you personally and financially. They will get insight into your marital status, lifestyle, personality, risk tolerance, age, income, marital status, etc., in order to plan the investment strategy that suits you.
These brokers will not only help you with your investment needs, but they can also provide assistance with estate planning, tax advice, retirement planning, budgeting, and any other type of financial advice.
Full-service brokers are more expensive than discount or online brokers, but you should understand that having a professional human investment advisor by your side is worth the high fees.
Buy stocks online
Online brokers do not provide any investment advice and are basically just takers of requests. This option is usually much less expensive than full-service brokers, as there is no office to visit and no certified investment advisors to help you. You will be able to buy and sell shares instantly, as soon as you open your online brokerage account.
Remember that you have to manage your investments on your own, the only help you will receive is technical support. If you feel you are knowledgeable enough to take on the responsibilities of managing your own investments, or if you don't know anything about investing but want to educate yourself, this is the way to go.
The bottom line is that you should rely on your individual needs when choosing a broker. Full service brokers are ideal for those who are willing to pay a premium to someone else to take care of their finances. But on the other hand, online brokers are best suited for people who do not have a large capital and who want to take on the risks and rewards of investing themselves, without any professional help.
Buying shares via direct stock purchase plan
Sometimes companies sponsor a special type of program called a Direct Stock Purchase Plan (DSPP). DSPPs were originally designed as a way to allow small investors to buy property directly from the company without hiring an intermediary.
Participating companies submit their DSPP through third-party transfer agents or administrators. If you would like to learn more about how to participate in the DSPP, you should contact the investor relations department of the company in question.
How do I buy and sell stocks?
Once you have chosen your brokerage platform, you will need to create and fund an account to start trading. Linking an online bank account and transferring funds, as well as electronically transferring your existing brokerage account to another company is easier than ever before. You can also make recurring deposits into your brokerage account to increase your portfolio on a regular basis.
Stocks are identified by a unique ticker code, which is a one to four letter memory assigned to a specific company. MSFT for example, is Microsoft Inc.'s tape. , and AAPL is Apple Inc.'s tape. If you do not know your stock ticker, it is easy to search for it online or via your broker.
When you select the stock index you wish to trade, you will receive a set of information about the stock price and its activity, ie the last price at which the stock was traded, as well as the bid and offer. You can place your order once you have studied the quotes.
Market orders are the simplest type of orders that will give you instant execution at the prevailing market price. On the other hand, a limit order allows you to set a specific price to buy or sell at. If you want the order to be active only for a short period of time, or to remain valid for longer than a day, or even if you want to set other conditions such as a stop-loss order, you can coordinate this with your broker.
When can you sell stocks?
In theory, the ability to make money from stocks involves two major decisions: buy at the right time and sell at the right time.
Buying a stock is relatively easy, but the decision to sell it is usually more difficult to make. You may risk leaving all your winnings on the table if you sell too soon and the stock goes up, and you may miss your chance if you sell too late and the stock goes down.
Many investors have difficulty when trying to answer the question: How do I sell stocks? It can sometimes be down to greed or our fickle human nature in general, but there are a number of strategies you can use to determine when is and isn't a good time to sell.
Difficulty selling stocks
You bought shares at $25 with the intent to sell them if you reach $30. The stock hit $30, and I decided to keep a couple more gains. The stock hit $32, and greed outweighed rationality. Suddenly, the stock price dropped to $29. You'll tell yourself you have to wait for the stock to hit $30 again, but that's never going to happen. This situation will continue until you finally succumb to frustration and sell at a loss when the stock reaches $23. This scenario shows how greed and emotion can influence our rational judgments.
To get around these feelings of sabotaging your plans, consider using a specific command. That is, you will automatically sell the stock when it reaches the target price, and you don't even have to watch that stock go up and down.
When should you sell?
There are some reasons that may push you to sell shares, which may relate to the shares themselves, the markets, your finance or even you and your lifestyle. Let's take a look at some of these causes or underlying factors.
Wrong Initial Buying Decision: You may have seen the massive gains for a stock, prompting you to place a large buy order, but soon realized that you had made a mistake just by doing so. The best course of action in this case is to sell the stock, even if it means incurring a small loss. To avoid making the same mistake in the future, you should resist the temptation to chase hot stocks because it could burn you financially.
Big stock appreciation: The strategy of selling a stock just because it has risen dramatically in price is not always successful. In some cases, price gains may be justified by company fundamentals such as rapidly growing sales and profits. But in many other cases, the price may have registered high gains only on speculation, or for other reasons such as acquisition rumors or short-term pressure. You should always do some research to ascertain the reason behind the rising stock gains and then make your decision based on that.
The stock hits the target price: If you promise yourself that you will sell the stock if it comes back to your purchase price, feel free to do so. Similarly, if the stock reached a level that was traded for a short period of time in the past, and you promised yourself to sell if it reached that price again, do not delay in doing so so as not to regret another missed opportunity.
Stock trading at a technical inflection point: When a stock is trading in the same position for several years and then breaks below, it foretells additional losses in the future. It may make sense here to sell the stock once it has taken a downtrend, and vice versa. Technical analysts closely monitor stock price charts to identify other signals such as moving average crossovers to help you sell at the perfect time.
Deterioration of Fundamentals: A stock's fundamentals may deteriorate for a number of reasons such as sluggish earnings, revenue growth, increased competition, rising costs, falling margins, etc. In such cases, you as an investor need to determine whether the deterioration in the stock's fundamentals is temporary or permanent in order to make the right decision.
The decline of a competitor's condition: Often, you can highlight problems affecting a particular sector when a leading company in it is damaged. Consider selling the shares you own in the same sector to avoid being affected by this wave.
Market volatility: Try to exclude weak names from your portfolio, ie those with a heavy debt burden or a weak financial position, as they are the first to collapse in the event of a financial earthquake.
Financial reasons: The stock may have gained a lot compared to the rest of the stocks in the portfolio, so the investor may need to rebalance his portfolio, or the investor may want to sell a share to book a loss for tax purposes. Another reason to sell stocks may be that the investor needs the cash to invest in a competing investment such as real estate. These financial reasons are too powerful to justify selling the stock.
Lifestyle: Changes in lifestyle also provide good reasons to sell stocks. Younger investors may consider selling all or part of their portfolio to make a down payment on a home or purchase a car. While investors about to retire may sell shares to reduce their exposure to risk, etc. for reasons related to the age group and marital status of the investor.
Frequently Asked Questions
If the price of the stock I own goes down, should I sell it or buy more? It depends on a number of factors such as the type of stock, risk tolerance, investment objectives, amount of investment capital, etc. If the stock is falling due to a permanent change in its expectations, it may be a good idea to sell it, but if it suffers a temporary setback, you can buy more and then wait for it to rise again.
Can I sell the stock on the same day I bought it? Yes, as long as you don't get used to it. Day trading can lead to huge losses and is best left to experienced and well-capitalized traders.
When will I receive the proceeds after selling a stock? The standard period for receiving stock sale proceeds is two days, also known as the T+2 settlement period.
Is it possible to buy and sell shares for free? Yeah. Many online brokerage platforms offer commission-free trading in most stocks and exchange-traded funds. These brokers make money from your trades by selling your order flow to financial firms and lending your shares to short sellers.
What is the easiest way to buy shares? The easiest way, regarding the transaction itself, is to open an account online, fund it and then place a market order. But don't forget to do your research before deciding what type of order to place and with whom.
Do you need a broker to buy stocks? Some publicly traded companies offer an outright stock purchase plan. Instead of using a broker, the company's transfer agent will manage the transaction.
How old do you have to be to buy and sell shares? You must be at least 18 years old in the US to open a stock brokerage account.
Profit does not always mean that you made money by selling your shares, but profit is even when you lose and you understand the reason behind your loss. Selling is only a bad decision when it is backed by emotion rather than data and analysis. Remember that once the decision to sell is made on the basis of thorough and rational research, the investor should not look back and avoid the seller's remorse as much as possible.