A lot of times if you’ve been doing something for a while, you tend to take things for granted.
I got a call from a prospective client, someone I’ve known for several years. They called me to ask me a question that I just thought everybody knew.
It was such a basic question when it comes to my profession that, like I said, I just took for granted and thought that everybody knew how to do it. The question was,
“How do I buy stock or how do I invest into stocks?“
I thought really, you don’t know the answer? I thought I would take a minute and address some of the different ways, if you are interested in buying stocks.
To give you some background on the person that called, they were in a 401K so they were investing for their retirement, but they never actually had gone out to invest into individual stocks. There was a certain stock that they were hot on and thought that they could make some money on so they wanted to go buy it. I gave her a few different places that she could go to do her own research and buy the stock.
Poor Your Foundation
First, if you’re looking to buy stocks, make sure that you’ve got a foundation set. I always hate it when people call me and they want to start investing in individual stocks and yet they don’t have anything saved in retirement.
- They don’t have a 401K.
- They don’t have an IRA.
- They don’t have anything.
- They don’t have an emergency fund, yet they want to start investing and playing in the stock market.
That’s one of my biggest pet peeves. It’s like a house, right? With a house you have to build a foundation first. You don’t start putting on the roof or start doing the inner accessories like the big screen TV and the couches before you have the frame work or foundation down.
Make sure you have those in place first before you go out and start buying stocks. That’s my entry disclaimer, but I just wanted to get that out there first.
Buying Stocks Online
Now if you’re ready to start buying stocks and you feel comfortable doing this, you have a couple different areas online you can go to. The first place you can go is any discount broker. Think E*TRADE, Capital One ShareBuilder, TradeKing, and I’m sure there are countless others, but these places are good. One, they’re very, very inexpensive.
Sometimes you can open accounts for free. Then to execute the trade, to actually buy the stock you may pay as little as $7.95 on up to 15 bucks per trade. That’s pretty reasonable, especially if you’re only going to be doing a few trades here and there. Some of them, and I’m not familiar with all the rules, but they may charge you an annual fee if you don’t do a lot of trading.
Definitely read all the fine print and rules before you engage in buying stock from an online discount broker. If it’s something, that you’re going to buying a few stocks here or there, that could be a viable option.
Buying Stocks Direct
Another option if you’re comfortable making the purchases online is to actually buy it through the company itself. One website that has a lot of arrangements with a lot of different companies is Computershare.
A lot of times when I have clients that have a share of stock that they either inherited or it was given to them, a lot of times computershare.com is the custodian. They will have to call them to liquidate it or to find out how many shares they own. Computershare just seems to be a common hub for a lot of these different companies.
How I’ve recently had some more relationship with Computershare was I wanted to buy stock for my kids, not so much as an investment, but more of a keepsake. I wanted to buy a share, put my son’s name on it as in the form of a custodial account. They had the actual certificate, something we could frame and put it on the wall and have a keepsake. I was having difficulty trying to find a certain stock that I wanted to buy. Sure enough I went through Computershare and they had an arrangement with that company so I’ll be doing that soon.
Computershare has a relationship with a lot of those companies. You can go to computershare.com and follow their links. I think you go to investor’s center and from there you can see some of the companies that they have an arrangement for. I think it’s over 500 companies. I’d have to check the website just to double check, but that’s another venue that you can go. I think it’s maybe a $15 transaction charge, so once again very minimal cost to do it. It’s another good, do-it-yourself, online arena where you can go to buy individual stocks.
Buying Stocks With a Broker
Okay, if you still want to buy stocks and you’re not completely comfortable going online to do it, I don’t blame you. That can be intimidating for a lot of people. You have to open up an account online, send some money to some faceless operation.
The other option you have is you could go to a local investment house, local stock broker and buy stock through them. Just so you know, by going that direction you’re probably going to pay more, considerably more, but at least you have a face of someone you can talk to. They can share their expertise of what you think is going to make you a lot of money, if it really is. Also, you have somebody that hopefully is going to educate you in having that foundation set.
All these different brokerage firms differ on their prices, but I have to think at minimum you’re going to be spending about $40 per transaction. So if you buy a certain number of shares it’s 40 bucks. If you sell again it’s another $40. That’s for a smaller amount transaction. The higher transaction you go, the more shares you buy, or the higher the share price is will then determine how much you’re commission is going to be.
Some of these firms as well, if you don’t trade frequently, they are going to hit you with either a small account fee or an inactivity fee. Be conscious of that. It’s definitely not the cheapest direction to go. Typically when I’m working with clients and if they want to do some stock trades or they have a younger relative or their kid that wants to buy shares of stock and that’s all they want to do, I usually will guide them to one of these online platforms if they are comfortable just to help save them a few bucks.
Those are some of the different options you have. If you want to buy stock, you can go online to one of the online discount brokers or go to computershare.com. If you’re not comfortable head to your local brokerage. Then, when you shop around I would maybe interview one or two different brokers just to see what would be the potential cost to do so. I would just say,
“Hey, how much would it cost to buy 100 shares of…..”
and just give them some stock, maybe the stock you’re interested in, just to see what it is and how much the fee is going to be. You want to make sure you know what you’re getting yourself into. Make sure you read the fine print before you proceed and make that initial investment.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.