Investing is now more inexpensive than ever. With the most popular firms reducing trade commissions to zero, investing is more accessible to everyone. Or it would be if everyone knew how to invest.
Choose Your Investment Firm
First, you have to pick a brokerage firm. This company will be your avenue to the stock market, and its website will process your transactions. The largest firm with no commission fees is Charles Schwab. Other commission-free firms are TD Ameritrade, Etrade, and Robinhood, with Robinhood being mobile-only. With these firms, you can buy shares of stocks, funds, and commodities. Most new users will start with stocks, exchange-traded funds, or mutual funds.
Choose a Percentage or a Whole
Any of the four would be good to buy and sell whole shares of stock. If you want to buy a percentage of a share, you can use applications such as Stash, Acorns or Stockpile. Also, there is a new option from SoFi called Stockbits. While Acorns and Stash may be mobile-only like Robinhood, they have a monthly fee. Stockpile has a cost of $0.99 per trade. Stockbits is free to use, and you can start investing with $1.00. Stockbits also offers access to financial experts.
Open an Account
Once you’ve chosen the firm or firms, you will apply for a new account. The process includes selecting your account type, funding the account, and gaining approval based on your answers on the application. They are similar to opening a bank account with additional questions related to the firm and what time of investing your plan to do. Additionally, they will ask if you are a stockbroker or if you’re related to anyone that works for the company. Also, don’t be alarmed that the firms will require your social security number. Investment firms, like banks, have to report any interest or dividend income for tax purposes.
Place Your Trade
To place a trade, you choose the stock or fund that meets your criteria, e.g., price, dividend yield, trend, etc. and complete a buy order. In most scenarios, you can click buy or sell, choose a quantity, set your desired dollar amount, and set any limits or expiration dates. You will confirm all of the details then submit your purchase order. Since the stock market fluctuates, your order may execute at a different amount than ordered. By setting limits, you can minimize the variance or cancel the order before it gets too high or low.
Invest in a Portfolio
If you purchase stock using Acorns, you won’t choose a stock or fund. You will assess your risk, and the app will choose a fund for you based on their current offerings. It will also automatically invest for you once you reach $5.00 in roundups or any figure you’ve allotted to transfer for extra investments. Essentially, you set up everything on your phone, and it rounds your purchases on connected cards up to the next dollar. This app is excellent if you want to start investing, but you don’t have a lot of money yet.
Other ways to invest in a ready-made portfolio are the Stash app, Ally Invest, SoFi Invest, and Etrade Core Portfolio. These may be great alternatives if you roll over an old 401(k) from a previous job but don’t want to pick individual stocks. Ally has a $100 minimum but no advisory fees. SoFi Invest has no fees if you have a loan with them, and you can start investing with only $1.00. Etrade has the highest minimum at $500. However, it has more educational tools if you see the value in those.
Whichever you choose, make sure you are comfortable. Read user reviews to gain insight into controls, customer service, and other important topics.