As a beginner investor it can be confusing when you have money to invest, but don’t necessarily know where to start. You’re probably watching the stock market going up and down, you may already know the types of stocks you want to buy, but don’t necessarily know how to buy them. In this article we want to show you just how easy it is to get started and point things you should keep in mind when deciding on the best investing options for you.
One of the easiest ways to start investing in stocks is to open a brokerage account. A brokerage account is a type of investment account which allows you to buy and sell stocks, mutual funds and bonds. There’s a wide range of well-established online brokerage accounts (Fidelity, TD Ameritrade, Charles Schwab, Hargreaves Lansdown (UK) just to name a few). With easy account opening processes, you can open an account in minutes with no initial deposit.
Here’s how to open an online brokerage account in 5 easy steps:
Do an online search for the right brokerage account for your needs (below we give you a few tips on the things you should look out for when choosing a good investment account).
Sign up by providing your personal details (most require you to provide your name, address, date of birth, social security number, employment and salary details, upload proof of ID)
Complete their security steps (most keep this as simple as possible, but be prepared to wait a day or two as they may need to verify your personal information
Once the account is approved, link your chosen checking or savings account to be able to fund your investments.
Start choosing the investments that you want to buy!
The process really is that simple. But as with everything, when it is that easy, it can be tempting to jump straight in and choose what appears to be the most popular online brokerage account, without necessarily asking yourself a few simple questions.
Do you want to make investment decisions yourself, or do you want an expert to choose and manage your investments for you?
How broad is the range of stocks that the investment account allows you to invest in?
Does the account offer fractional shares?
Can you buy and sell your stock in real time?
How low are their fees?
What level of customer support do they offer?
Do you want to make investment decisions yourself, or do you want an expert to choose and manage the investments for you?
If you want to buy and sell shares yourself, an online brokerage account is a good option for you. You can buy and sell shares when you want, based on your own research and once opened, you simply fund your account with the money you want to invest. You can move money in and out of a brokerage account, by linking it to your checking or savings account. Keep in mind however, that it normally takes a day or more for the money to transfer and be available to you to invest with.
If you prefer to have your investments managed on your behalf, the cheapest and easiest option would be through a Robo-advisor. Rather than having a financial expert managing your account and charging a high fee to do so, a Robo-advisor is an investment platform which works on the basis of an algorithm that considers your risk profile and based on a number of factors, determines which are the best investment products for you. You answer a few simple questions to define the time window that you are aiming to invest for, the level of risk you are willing to take on and types of products you want to invest in (i.e. Shares, bonds, index funds etc.) The algorithm then creates an ideal portfolio for you and manages it with the aim of delivering the best returns for you on your investments.
You’ve probably heard of platforms like Acorns, which rounds up your spare change and invests that money in the stock market on your behalf, or Betterment, which based on your goals and risk preference, will invest your funds in specific investment pots which best fit your needs. There are more and more Robo-advisor services coming onto the market, so if you want to keep things simple, this could be a great option for you and your investments.
How broad is the range of stocks available?
It's important to know that not all brokerage accounts are the same in terms of the rage of investment products they offer. Yes, generally they all give you access to the most popular stocks, but they might not offer access to bonds, or foreign stocks outside of your home country. Therefore, if you want a brokerage account which will give you access to a broad range of products as well as international stocks and bonds make sure you check their product scope on their website, so you have the ability to diversify your investments with international stocks, bonds, mutual funds if you wish to.
Do they offer fractional shares?
Another way that the investment industry has made it easier for everyday investors to get involved is by offering the possibility to buy and sell fractional shares. While you may not be able to afford an Amazon share trading at over $3,000, you could afford to buy a fraction of an Amazon share and build up the percentage of the share you own over time. Not all brokerage accounts, even the ones which offer a great service in every other areas, offer fractional shares. So, if you want to have the option to buy fractions of a share, based on what you can afford at the time, you will want to ensure that your brokerage account offers this.
Do they allow you to buy/sell in real time?
Most brokerage accounts allow you to buy or sell your stock at any time throughout the day, as long as the markets are open. However, there are a few services which allow you to place your order to buy or sell, but they won't actually action it until the end of the trading day. They combine all of the small customer orders received during the day and place the trade once everything is in, at the end of the day. Your request to buy/sell will be fulfilled within that day, but you might not necessarily benefit from the best available price during the course of that day. So, if the best price as at 12:00 noon, but the order is only placed at the end of the day, the stock price may have fallen or risen in the meantime. Depending on how important the daily price movements are for you, this may or may not be the right type of account for you.
How low are their fees?
When signing up for a service, you’ll want to be clear on their fees. If the costs of maintaining the account are higher than the rate of return that you are getting on the investment, then you’ll want to rethink that.
What type of customer support do they offer?
You’ve probably heard this before, but you can’t judge how good a service is until there is a problem. Any company can have a great looking website and offer you the world, but if they don’t step up when things go wrong, particularly when it comes to your money, none of the other stuff is worth it. Before you sign up to a new brokerage account check their website for information on ways you can contact them. Do they provide a telephone number, or email only? Do they offer round the clock customer service, or during business hours only? Do they offer a live chat service? How good is their help and support section on their website, are their FAQ’s comprehensive and easy to follow? You will know what is important to you, but just make sure that there is someone to take action when you need it if things go wrong with your account.
It's now easier than ever to buy and sell shares, so when you decide to start investing ask yourself the questions above, be clear on what features are important to you and choose the investment account that meets your needs the best. You're also not restricted to only one account, so when doing your research, check that the platform you want to use is insured and regulated as well as providing the type of service that works best for you.
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