Buying Shares in 2023

If you are new to online trading, then buying shares of a public company is the easiest and most straightforward way to get started. Our latest guide here at StockWire will outline exactly what shares are while walking you through the process of buying shares and finally, providing insightful tips! 

Understanding the Concept of Shares and the Stock Market 

There’s no substitute for a thorough understanding of different financial securities. For the purposes of this guide, we’re going to run through the meaning and characteristics of stocks and how the overall stock market functions. 

Shares 

When a company issues shares, the value of each share depends on the total number of shares against the total capital of the company. Thus, a single share represents a unit of ownership in the underlying company. These shares are listed on the stock exchange and can be bought and sold by the public. The value of stocks depends on the company’s financial performance and the future outlook of the entity. Therefore, the price of stocks increase and decrease based on how the company is fairing at any given time.

Why do companies issue stocks? The reason why companies sell off ‘ownership’ is to raise capital which enables the entity to continue running the business and/or expand operations. In exchange for buying shares, you become a vested shareholder and ‘owner’ of part of the company. 

Stock market 

In essence, the stock market can be seen as a marketplace where stocks are available to be bought and sold. Potential buyers and sellers converge on the stock market and trade stocks at a given price. Bear in mind that there are multiple stock markets all over the world and the top trading sites provide you with access to a fair number of these. 

The pricing of stocks is dependent on various aspects which play a role in determining the price while demand and supply are also pivotal in shaping price points. It’s possible for everyone to buy stocks online. Before you do so though, it’s best to get a better idea of which stocks offer the most value while providing a certain level of security. 

Knowing How Much to Invest 

When it comes to investing in shares, it’s possible to spend small amounts depending on the company you wish to invest in. Buying a share of Pfizer at the time of writing costs less than $50 while investing in Microsoft can cost five times as much per share. It’s clear that how much you should spend is subjective and depends on how much you are looking to spend and the pedigree of the company you wish to invest in. 

We recommend that you draw up a budget and then stick to it by putting aside a percentage of your monthly income. Naturally, it’s wise to only begin doing this if you are debt-free and have access to emergency savings which should total around 3 months of income. 

Identifying the Best Shares to Buy 

There’s no definite strategy or approach that we can recommend in order for you to identify which shares are most profitable to buy. At the end of the day, it comes down to doing your own due diligence through market research. 

There’s expansive information online for companies listed on the stock exchange. Take the time to identify several companies you are interested in and comb over financial reports and analyze industry assessments made by professional analysts. This will be sure to provide you with better insights, helping you invest in the right shares. 

Expert Tips for Buying Shares Online 

Our tips have been crafted by our experts who have plenty of years of experience in the online trading industry. If you apply these tips, we have no doubt that you can improve your chances of realizing a profit while trading online. 

Don’t invest everything at once 

When you start out investing in stocks, we recommend that you ease into it. There is no need for you to invest the bulk of your money from the get-go. This holds especially true if you are new to trading. Find your feet and gain confidence through exposing yourself to the market one step at a time. 

Clear all debts and start investing with a good credit score 

It is never a good idea to start investing if you have debts elsewhere. We implore you to clear all of your outstanding debts and ensure that you start investing with a decent credit score. Obviously, we’re not talking about loans such as a mortgage but smaller cash loans that charge you interest every month. 

Set yourself an investment budget 

You don’t require a large amount of funds in order to start investing but the total amount that you are willing to invest will affect how you should go about doing so. If you are looking to spend $500, then investing in a couple of stocks of long-standing companies is a better idea than stocks of unproven companies.  

Invest money on stocks that you are familiar with

Utilize your past knowledge and interest in specific industries or companies to your advantage. If you are well-versed in stock options from a certain industry, then you’ll be able to make good judgment calls as to which stocks you should buy and when to do so. 

Don’t put all of your eggs in one basket 

You have definitely heard the saying and it couldn’t be more applicable when investing in stocks. You should always look to invest in stocks across multiple industries as diversifying your holdings will spread the risk and ensure that, if one industry or company performs badly, not all of your stock holdings will fall in value. 

Utilize any possible tax breaks  

There are a number of tax breaks that you can benefit from. This means that you won’t necessarily have to pay capital gains tax on investments which have appreciated over time. For instance, you can buy stocks of a ‘qualified small business’ and if you hold those stocks for five years, any profits made from the subsequent sale is tax-free. We urge you to reads up more about legal tax breaks for investors as this can save you a lot of money that otherwise eats into potential profits. 

Invest in companies that pay out dividends 

One way to make the most of compound interest is to invest in stocks of companies that pay out dividends (a portion of profits) to shareholders. If you buy these stocks, then you are entitled to dividends which you can use to reinvest in more stocks which result in higher future dividends. 

Overview of Buying Shares for Newcomers 

No matter which stocks you are interested in buying, you’ll find that the general process is the same. We’ve run through the process, from start to finish, so that you know exactly how to go about buying stocks online. 

Find the right online trading platform and sign up 

You will need to take the time to find the right online trading platform as this enables you to utilize the services of the broker in question. We have reviewed and listed the very best online broker sites that are inclusive of traders with minimal experience as well as those of you who have experience buying stocks online. 

Once you have found the right trading platform, you can complete the online registration process. This includes providing all of your personal information and verifying your identity by uploading an identification document. 

Set yourself a budget and deposit funds 

You need to take into account your financial limitations and set yourself a budget. This gives you good oversight as to how much you end up investing without finding yourself in debt. Put a cap on the maximum amount you are willing to spend and then make a real money deposit into your trading account. 

Analyze stock options to find the best possible investment 

Before you invest, you need to assess which stock options provide reasonable value and have a proven track record of being as least volatile as possible. It’s advisable to do as much research into reputable companies as you can before placing a stock order. 

Place a stock order online 

Log into your online trading account, search for the relevant stock that you are interested in buying using the search function. Stocks are listed by displaying a ticker symbol such as MSTF which is Microsoft Corporation. Once you have found the stock you wish to buy, you can input how many shares you wish to purchase and how much the total value of the order is.

Execute the trade 

Once you have double-checked that all of the trade details are correct, you can simply click on the ‘buy’ button online so as to execute the order. Once the order is processed, your shares will appear in your trading account. 

Keep an eye on the stock/s you have bought 

The last step, one which many overlook, is to monitor your stock investments on a continuous basis. Your stock investments might increase in value but can also drop due to changes in the market. You need to be privy to these changes so that you are ready to potentially sell stocks in order to make a profit or cut losses. 

Pros and Cons of Buying Shares in 2023

We’d be remiss not to mention that buying stocks has inherent risk attached to it and you need to be aware of this. Stock prices are likely to go down at any point in time, regardless of whether you have done ample research and selected a company most likely to provide you with returns on your investment. There are a wide range of internal and external factors that can lead to a negative change in price of specific stocks as well as downswings of the market as a whole. 

Moreover, risky investments are linked to companies which are new to the industry or have little, to no, credentials and experience in turning a profit. Lastly, you should also note that high rewards are very appealing but come with increased risks. 

Below, we have run through the biggest advantages to investing in stocks as well as potential downfalls or risks which are always present. 

Pros

• Purchasing stocks is the easiest way to start investing 
• Viable way to increase your wealth 
• Access to stocks across the globe 
• Higher returns than standard savings accounts offered by banks 
• Pursue stock options from companies you have an interest in

Cons

• Can’t control all factors in the stock market 
• Stocks aren’t always stable and prices can drop at a moment’s notice 
• High risk involved when using leverage 
• Possible to lose your overall investment