So let’s assume that you’ve decided that you want jump into the stock market but have no idea where to start.
Before you even consider which company that you are going to invest into, you first need a few things:
1. A brokerage account
2. Some money to invest, and
3. Knowledge about how to place buy and sell orders
Opening a Brokerage Account
Whilst there are many different types of brokerage accounts, from full service where you get your own real life broker to make recommendations and to place your orders for your, to online brokerage house which are much less expensive but don’t offer advice.
Personally I use an online broker since I like to be in control at all times and the fees to place a buy or sell order are WAAY less expensive.
I go into more detail on choosing a broker in Shopping for Shares, but for simplicity sake those are your main two options.
How Much Money Do You Need to Get Started Investing?
Actually you don’t need a lot of money to get started in the stock market. Or at least not as much as you would think. I started with just $1,000 and built up from there, but generally I recommend that people have at least $3K to $5K so that they can spread their risk around to a few companies and they are not stuck with just one.
If you don’t already have that much lying around, then it’s time to implement a savings plan to get there.
Placing Orders
Most online brokers have a pretty simple system for placing a buy or sell order. Generally you will get a form page in which you will have to fill out the code of the stock that you want to buy, how many shares you want in that company and whether you want to buy at market value (whatever the current price of the share is) or a different price of your choosing.
It will then give you an estimate of how much that trade will cost based on the current market value of the stock price of that company to which you confirm your order.
You will need also to have set up a way to get funds to your broker too, and that can be as simple as allowing the money to be withdrawn from your everyday bank account, or a separate account that you’ve opened just for the purposes of trading.
After you place your order, the funds will be withdrawn generally T+3 (trade day plus three extra days) after your order goes through.
