Investing for Dummies by a dummy
Finance

Investing for Dummies by a Dummy – Part Two

When it comes to shopping, I am someone who knows what I like. I don’t stand and mull over a shirt or a new set of dishes; I know right away if I’m going to get it or not. While there are things that help me make that decision quickly (price, uniqueness, something entirely irrelevant that happened that I can use as a sign that I have to get it) it is not that simple when it comes to stocks.

Once you have the basics down (see part 1 of this installation for reference) you’ll need to make some decisions that will require research. There are so many options when it comes to what platform you should use, how much to invest, and most importantly what stocks to buy.  

So Where Do I Buy Stock?

First, you need to decide whether you want to buy them yourselves or put it in the hands of an expert. These articles are more geared to a DIY approach to investing, however it’s important to note that the option is there. Apart from your standard 401K, some financial companies offer the service of financial advisement. These almost always include a minimum spend and sometimes a fee.

When buying yourself, you need to select a platform to open your account through. Here are the few I’ve tried, with pros and cons listed.

E-Trade

Pros: Pretty easy interface for beginners, free investing advice for the first month with sign-up, a minimum investment of $500 (can be waived with continuous monthly investments).

Cons: Canadian stocks unavailable for purchase through e-trade, cost per transaction is $6.95 at this entry-level.

RobinHood

Pros: No minimum and no transaction fees for purchases. Great mobile interface, easy sign-up, $5 stock bonus with sign up of yourself and/or friends.

Cons: somewhat limited in trade options.

Ally Invest

Pros: Number one rated platform with low-priced fees and doesn’t require a minimum in the account.

Cons: Platform sweet-spot intermediate to advanced investors, may be a little confusing for beginners.

What Stocks Should I buy?

This feels like a loaded question, doesn’t it? I’m not going to tell you which companies you should buy stock in or give you any info based on performance, because by the time you’re reading this article the information will probably be redundant. Instead, I’ll give you a method I picked up from dipping my toes in the stock market:

What are You Interested in?

While it’s important to understand projected stock industry trends, it’s best to start investing with something you’re actually interested in. Love cars? Find Robotics interesting? Believe in a certain pharmaceutical company’s research? You will be doing research around companies within these industries, so it’s important to have it be something you want to learn more about. Start with one industry and expand to multiple portfolios once you have a basic understanding of what you’re doing.

What’s Companies Should I Buy Stock in?

Once you’ve chosen an industry to focus on, this is the time to do your homework. A simple google search of ‘available stocks in ________’ will likely yield multiple articles and lists of top performers, depending on the niche you choose. Look at things like price, tenure, projected trends, company history, and objectives to make decisions around which you’d like to start with.

I found it easy to make a chart and compare these categories, understanding which I was most interested in and what I could afford. From there I did a bit more research into company performance and future initiatives to make sure they were a stable and growing company. With my list of options compiled, I finally narrowed it down to about five companies based off price.

How Much Should I Pay?

When I started out, I had a low-budget and decided to keep my investments at less than $30 per stock. The three platforms provided should have a tool that will show you historical cost and, if you’re lucky and have a feel trial, projected trends. You’ll likely see a lot of peaks and falls creating a steady, climbing, or declining trend line for each company’s performance. While the best time to buy is during a fall (best price), buying at a median level will allow you to obtain the stock in hopes of it going back up in price over time. If you decide not to buy at this time, add the stock to a watch list where you can keep an eye on cost.

If the line is slowly climbing and historical trends show this happening over the past year, it’s best to purchase this stock early in hopes that this climb (and value) will increase. Adversely if the line is declining, you may want to do more research into why there is a decline before investing, and only do so during a fall in price compared to previous highs.

Once you’ve completed these three steps, you’re officially an investor! In the next segment of this investing series we will get into mutual funds, high vs. low risk stocks, and trading.

Which industry did you decide to invest in? Share in the comments below!

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