How do I buy and sell shares
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: 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 allows you to obtain shares from some public companies directly.
Where to buy stocks
Stocks are listed and traded on licensed exchanges and places where buyers and sellers meet. Brokers are also members of the exchange and use their access to buy and sell stocks on your behalf. Major stock exchanges in the United States include the New York Stock Exchange (NYSE) and NASDAQ.
Smaller companies with less liquid stocks can trade on less well-known trading platforms such as the OTC Pink Sheets. The stocks of these companies are often more volatile and riskier, 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: a well-dressed businessman talking to clients from his desk. These are traditional stockbrokers who will take the time to get to know you personally and financially. They will take an insight into your marital status, lifestyle, personality, risk tolerance, age, income, marital status, and other factors, in order to plan the investment strategy that suits you.
Not only will these brokers 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 brokers or online brokers, but you should understand the value of having a professional human investment advisor on your side that is well worth the high fees.
Buy stocks online
Online brokers do not provide any investment advice and are basically just order takers. 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 stocks instantly, once you open an 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 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 base yourself on your individual needs when choosing a broker. Full service brokers are ideal for those who are willing to pay a premium for someone else to take care of their finances. But on the other hand, online brokers are more suitable for people who do not have a lot of capital and who want to take the risks and rewards of the investment on their own, without any professional help.
Buying shares via a 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 for small investors to buy property directly from the company without the use of an intermediary.
Participating companies submit their DSPP through third-party transfer agents or administrators. If you would like to know more about how to participate in the DSPP, you should contact the investor relations department of the respective company.
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, in addition to electronically transferring your existing brokerage account to another company, is now easier than ever, 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 character memory assigned to a specific company. MSFT for example, is the Microsoft Inc. tape. , and AAPL is Apple Inc.’s bar. If you don’t know your stock ticker, it’s easy to look it up online or through your broker.
When you select the stock index you wish to trade, you will receive a set of information about the share price and activity, i.e. the last price the shares were traded at, in addition to the bid and offer. You can place your order once you have studied the quotations.
When can you sell shares?
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 deciding to sell it is usually more difficult. You risk leaving all of your gains on the table if you sell too early and the stock goes up, and you may miss your chance if you sell too late and the stock goes down.
Many investors struggle when trying to answer the question: How do I sell stocks? Sometimes the reason may be due to greed or to our capricious human nature in general, but there are a number of strategies that you can use to determine the right and wrong time to sell.
Difficulty selling shares
You bought shares at $25 with the intention of selling them if it reached $30. The stock reached $30, and you decided to hold on to a couple more gains. The stock reached $32, and greed trumped rationality. Suddenly, the share price fell to $29. You will tell yourself that you have to wait for the stock to reach $30 again, but that will never happen. This situation will continue until you finally give in to frustration and sell at a loss when the stock reaches $23. This scenario illustrates the impact that greed and passion can have on our rational judgments.
To overcome these sensations that may sabotage your plans, you need to consider using a limit order. That is, you will automatically sell the stock when it reaches the target price, and you will not even have to watch this stock rise and fall.
When should you sell?
There are some reasons that may push you to sell stocks, which may relate to the stocks themselves, to the markets, to your financing or even to you and your lifestyle. Let’s take a look at some of these basic causes or factors.
The fundamental reasons
Wrong Initial Buying Decision: You may have seen the huge gains of a stock, which prompted you to place a large buy order, but you soon realized that you made a mistake once you did. The best course of action in this situation is to sell the stock, even if it means taking a small loss. To avoid making the same mistake in the future, you have to resist the temptation to chase hot stocks because it can burn you financially.
Significant increase in shares: The strategy of selling a stock just because it has increased significantly in price is not always successful. In some cases, price gains may be justified by the company’s fundamentals such as its rapid growth in sales and profits. But in many other cases, the price may have posted high gains only on speculation, or for other reasons such as acquisition rumors or short press. You always have to do some research to ascertain the reason behind the rise in stock gains and then make your decision based on that.
The stock reaches the target price: If you promise yourself that you will sell the stock if it returns to your purchase price, feel free to do so. Likewise, if the stock reaches a level it was traded for a short period of time in the past, and you promise yourself to sell if it reaches 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 has been trading in the same location for several years and then breaks below it, it portends additional losses in the future. It may make sense here to sell the stock once it has taken a downward trend, and vice versa. Technical analysts watch stock price charts closely to spot other signals such as moving average crosses to help you sell at the perfect time.
Deterioration of Fundamentals: The fundamentals of a stock may deteriorate for a number of reasons such as slowing earnings, revenue growth, increased competition, higher costs, lower margins, etc. In such cases, you as an investor need to determine whether the deterioration in the fundamentals of the stock is temporary or permanent in order to make the right decision.
Competitor’s deterioration: Often times, you can highlight problems affecting a particular sector when a leading company is harmed. Consider selling the shares you own in the same sector in order not to be affected by this wave.
Market volatility: Try to exclude weak names from your portfolio, that is, 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 share may have gained a lot compared to the rest of the shares in the portfolio, so the investor may need to rebalance his portfolio, or the investor may want to sell a share to reserve a loss for tax purposes. Another reason for selling stocks may be that the investor needs the liquidity to invest in a competing investment such as real estate. These financial reasons are too strong to justify selling the shares.
Lifestyle: Changes in lifestyle also provide good reasons to sell stocks. Younger investors might 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, and other reasons related to the age group and social status of the investor.
Frequently Asked Questions
If the price of the share I own goes down, should I sell it or buy more? It depends on a number of factors such as type of stock, risk tolerance, investment goals, amount of capital invested, etc. If the stock is falling due to a permanent change in its outlook, it may be advisable 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 share? The standard period for receiving the proceeds of a stock sale is 2 days, which is also known as the T+2 settlement period.
Is it possible to buy and sell shares for free? yes. Many online brokerage platforms offer commission-free trading in most stocks and exchange-traded funds. These brokers make money from your trades by selling the order flow to financial firms and lending your shares to short sellers.
What is the easiest way to buy stocks? The easiest way, for the deal 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 application to place and with whom.
Do you need a broker to buy stocks? Some publicly traded companies offer a direct stock purchase plan. Instead of using an intermediary, the company’s transfer agent will manage the transaction.
How old do you have to be to buy and sell stocks? You must be at least 18 years of age in the United States to open a brokerage account and trade stocks.
Profit does not always mean that you have made money by selling your shares, rather the profit is even when you lose and you understand the reason behind your loss. Selling is only a bad decision when it is supported by emotion rather than data and analysis. Remember that once the decision to sell has been made on the basis of thorough and rational research, the investor should not look back and avoid seller’s remorse as much as possible.
Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.