It is never too early or too late to start investing. It is easy to start you do not need to be wealthy to open an online account. Reputable online brokers require investors to start with a deposit ranging from $500-$2500 and they charge $7-$9.99 to buy or sell a stock. If you do not have much money treat it as a 401k and only add $100 every 2 weeks. For a beginner it is best to use dollar cost averaging especially with the market setting new highs. Even if you have the cash do not invest all your money at once.
Make sure you understand the risks and costs of trading. Pick stocks you are familiar with and companies that interest you. Understand that stocks are not all alike they do not move or feel the same. A stock with high beta (above 1) like Facebook (FB) will be very volatile it will change in price more than the Dow (DJI) or S&P 500 (GSPC) the opposite is true for Pfizer (PFE). Another way to tell how a stock will move in price is by the volume, a stock like (GE) with over 31 million shares will need a lot of buying from investors to make the price move in either direction. General Electric is not a good stock for a day trader but it is a good stock for a long term trader or swing trader. On the other hand a stock like Visa (V) with 3 million shares won't require much buying or selling for the stock's price to move making for some quick gains or losses.
When buying or selling stock a limit order is one of the safest ways to get a stock at the price you want. If you place a limit order to buy Merck (MRK) at $43.50 the order will not execute unless the stock reaches a price of $43.50 or less. When purchasing a security I recommend buying 100 shares minimum if you do not have the means then buy what you can. As a long term trader diversify and buy regularly only readjust occasionally to protect your portfolio.
I would like to know how do you use dollar cost averaging if your online broker charge for each ‘deposit’ $7-$9.99 to buy or sell a stock? It’s about a 10% cost for each deposit of $100 every 2 weeks,which seem to be a to big ratio. For now , here in Canada I actually buy TD’s e-Series index funds with very low MER (Management Expense Ratio) from 0,33% to 0,53%. The only other fee I have to pay is if I redeemed the fund within 30 days of purchase ( penality of 2%.) I can set up a PPP with no fee, and the amount can be as low as 25$ each time. I trade directly with the bank, with no fee…You probably have equivalent in united-state with TD.com.
ReplyDeleteGood question, thanks for asking. That is something investors will have to deal with and hopefully use good money management skills as they grow and learn. It is better for new investors to open and account and add regularly than for them not to get in the habit of putting money in their account. It is $7-$10 for every trade, they may deposit $100 every 2 weeks but only buy once a month at first, then as they get more involved with their accounts and learn about stocks they may chose to buy less often if the $7 commission bothers them. If they wait too long they will miss out on opportunities, dollar cost averaging may mean buying every 3 months. As new investors continue buying they will develop a way to evade costs by either saving more or waiting to have added more funds to buy. From my experience if you tell someone to save $5000 and then start investing they will probably not do it. What you are talking about sounds like a mutual fund, I don't buy mutual funds the only ones I have are in my 403b. There are NTF no load funds in the U.S. but I don't trade them.
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