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Beginner’s Guide to Investing in Shares: How to Buy Stocks

The stock market is a rich ecosystem offering financial opportunities for everyone. However, it’s crucial to prepare before making a purchase. Gathering the necessary information and knowledge will help you determine the best stocks to buy and the right time and place to buy them.

If you’re among the many investors seeking knowledge on how to buy stocks, this guide is for you!

Understanding Stocks

Stocks represent ownership in a company or business, giving shareholders a claim on the company’s assets and profits. By owning a share, individuals become partial owners of the company.

Also known as equities, stocks are traded on exchanges electronically. Some companies sell their stocks directly to investors, while others do so through brokerage platforms.

Companies list their stocks to raise additional capital. Major stock exchanges include Nasdaq, NYSE, Euronext, and the Shanghai Stock Exchange.

Before buying stocks and hoping for profitable returns, focus on several key points.

Research Your Options

Becoming a profitable investor requires extensive research, awareness, and hard work. Start by gaining insight into these key topics:

  1. Investment Principles: Understand risk tolerance, diversification, and investment goals. Whether you aim to be a day trader or save for retirement will greatly influence your decisions.
  2. Stock Evaluation: Research which stocks to buy and assess their potential for price increases. Company popularity, technological breakthroughs, and global events can significantly impact stock prices.
  3. Choosing a Broker: Your broker is your gateway to the market. Ensure your broker is regulated, has a reliable track record, and offers the specific products you’re interested in at a fair price.

Choosing the Type of Stock

When researching stocks, you’ll encounter various subcategories based on criteria like company size, industry, and location. Terms like common stocks, preferred stocks, growth stocks, microcap stocks, income stocks, IPO stocks, and penny stocks will surface.

Two major types to focus on are:

  • Common Stocks: These are the most frequently traded and ideal for retail traders. Owners share in the company’s profits and can vote on company matters.
  • Preferred Stocks: These shareholders receive profits before common shareholders but do not have voting rights. Preferred stocks are less volatile, making them a more stable but less potentially profitable investment.

Where to Buy Stocks

According to Vanguard, stock portfolios have consistently outperformed bonds from 1926 to 2021. This highlights the potential of stock market investments.

Here are some reliable methods for buying stocks:

  1. Stock Exchange – Full-Service Broker: Full-service brokers cater to wealthy individuals with comprehensive services like retirement plans and real estate investment strategies. Their services are expensive but thorough.
  2. Online Brokerage Account: Most retail traders prefer online brokers. These platforms offer various account types, including margin accounts, which enhance buying potential. Look for brokers offering platforms like MT5 or cTrader.
  3. Direct Stock Purchase Plan: Buying stocks directly involves additional fees and is conducted through third parties rather than the company itself. In the US, examples include AST and Computershare.

Beware of Stock Market Scams

The stock market has always attracted swindlers. Scams include pump and dump, scalping, and stock-shorting, often overlapping with schemes like boiler room scams, pig butchering, and Nigerian prince scams.

Thoroughly research any company before investing. Stay informed by following updates on fraudulent schemes on reliable websites.

What to Do If You Fall Victim to a Scam

The internet has enabled sophisticated scams that can deceive even experienced investors. If you fall victim to a fake stock broker, seek professional help to recover your funds. Book a free consultation with expert teams specializing in fraud recovery.

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