How to Start Trading Stocks Online

What are stocks?

Stocks are a partial ownership in a fraction of a company. These stocks can be bought and sold on the stock market by their purchaser, which is also known as a shareholder.

Before you invest, educate yourself and look at your finances to determine what you can invest in the stock market. Learn the basics of how to invest in stocks for beginners here!

What are the benefits of investing in stocks?

There are many benefits to investing in stocks. Some of these include:

  • Capital Gains – As the stock price appreciates, so do your capital gains.
  • Dividend payouts – Some companies pay out dividends to their investors or they may choose to invest these dividends back into the company to facilitate its growth and further success.
  • Minimal Liability – Even though a shareholder owns a certain percentage of the company which they have invested in, they are not liable if the company goes bankrupt.
  • Voting Power – When you become a shareholder, you own a part of the company that you have invested in and are therefore entitled to a say in how the company is run. Decisions like changes in management or operation policies can be voted on.

How do I know which I should invest in?

One of the biggest challenges that people face when they start contemplating the idea of investing their money in stocks is knowing which stocks they should invest in. With markets that fluctuate on a daily basis it can seem overwhelming to make the decision regarding which stocks you think will do well and are comfortable purchasing and which have the potential to fail. The stock market doesn’t have to be that daunting though. With some preparation and some detailed research, you can make an educated decision that will pay out well in the end.

When trying to decide where to invest your money you should first:

Set goals

What are your goals in terms of your investment? Take a look at how long you are planning on investing your money for and what kind of return on investment you are hoping to get. Generally speaking, the longer you plan to invest the safer your investment is. Short term investments are considered riskier as the market fluctuates up and down on a daily basis, but generally show a slow but steady upward trend.

Determine how much you want to invest

The amount of money that you want to invest will play a big role in determining which stocks you can afford and in what quantity.

Do your research

This is one of the most important factors when trying to decide where to invest your money and which stock to choose. It is vital that you keep up-to-date on the latest market trends and financial news. Spend time learning about the different companies that you are interested in and take the time to observe how their stocks perform, prior to making an investment. It also helps to get the opinions of others. Ask other investors what their thoughts on a certain stock are and see what the general consensus is. The more time and research you put in, the better your chances of receiving a higher return on your investment.

Choose an industry that you are familiar with or one that interests you 

If you choose to invest your money in an industry that interests you, you will be more likely to put in the required time to properly research the stocks that you are considering. The entire investment process will be more fun and exciting if your chosen stock belongs to an industry that you find engaging.

Who can help me if I’m not comfortable making an investment decision myself?

The stock market can be an overwhelming place for a new investor. Knowing where and when to buy and sell can be confusing. It doesn’t have to be though. There are lots of places to turn for information and advice that can make your investing experience an easier and less stressful one.

  • Online broker – While an online broker doesn’t offer personalized, one-on-one advice, it is the perfect option for someone who needs a little bit of guidance when it comes to investing and understanding the stock market. This service can provide information to help you make an educated decision and offers all of the tools necessary to facilitate your investments for a minimal fee.
  • Full Service investment firm – While much more expensive, a full service investment firm will be able to provide you with a hands-on, personalized plan for investing your money and will take care of all of the necessary transactions on your behalf.
  • Robo-Advisor – A robo-advisor is very much what it sounds like – an automated, computerized program that uses detailed mathematics, calculations and algorithms to determine where the best investment options are.

If you would like more information on investing or have specific questions about investment opportunities, click here for helpful advice.

Frequently asked questions about trading stocks online

What does the term “Blue Chip” mean?

This is a term that you may come across when looking into stocks. A blue chip stock is one that belongs to a reputable company and is considered to be a safe and reliable investment.

What does best of breed mean?

A stock that is considered best of breed is one that ranks as higher and more reliable compared to its competition within its industry.

Is investing in stocks online difficult?

No. While the stock market may seem overwhelming at first, investing in stocks can be a fun and easy process. With a bit of research and the guidance from some online assistance (such as an online broker, robo-advisor or an investment firm) investing in stocks can be an enjoyable and lucrative experience.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

Amanda Leach

Fifteen years can be a long time to work in one industry, but not when you are doing something that you love. Amanda has enjoyed the freedom of working as a freelance writer for the majority of her career. She has successfully combined her passion and skill for writing while still enjoying a life filled with travel, learning and exciting new experiences. While she loves exploring all different types of writing, her PhD in Consumer Psychology has made her a sought after writer for marketing, business and technology fields. Amanda is a regular contributor to Smarter Loans.