How exactly does one go about buying shares in stocks here in the US?

[magellan]

Do you have to open a $$ account with a brokerage or is it possible to simply buy shares one at a time?

And would it be worth investing in oil and agriculture as my husband saw on CNN's "On the Money" earlier?

I'm sorry if this is in the wrong forum or if these sound like stupid questions. I've never invested before and my husband, who's British, has only dabbled very superficially in stocks in the UK. We have a little bit of money we'd be willing to invest long-term if it seemed a marginally good risk, but not enough to open $2500 accounts or anything.

[Speck Tater]

1. Open an account with an online trading firm. It's easy. NT

[magellan]

2. Honestly, I know nothing about this. Can you recommend a firm?

So far we've found Sharebuilder.com. Any comments on them or alternatives to suggest?

[Speck Tater]

6. Not an endorsement, but I'm happy with e-trade. nt

[magellan]

11. Thanks, fiziwig. Heard of them, will add them to the list to explore. n/t

[Captain Angry]

3. Ok, stop and read carefully.

Hi there.

1: On your second question first: The key to investing is to buy low, and sell high. Once you have looked at the fundamentals and reasons for the current price of an asset, can a decision be made on what direction the price of the asset will go? Has oil, gold, wheat gone up in price solely due to demand for the good, or demand for the safety of that sector? Would you be prepared to lose everything if oil prices dropped $50.00 a barrel over a few months?

2: There are many online brokerages, depending on your goals, some are better than others. Rather than trading online, I would recommend you find a local financial adviser. Many of them do a free consultation to explain their methods and such. That would be far better for you if you're not actively following the market with a specific plan.


Something to remember. When everybody is running in one direction, it sometimes pays to look at why that is. And could that crowd start running in another direction?

The dot-com industry got HUGE and crashed. The money flowed out of the market and into real estate. Real estate got HUGE and crashed. The money flowed out of real estate and into commodities (gold, oil). Commodities have gotten HUGE...

[wryter2000]

5. A few questions

It's my impression that you're pretty safe if you buy an established company and hold onto the stock for the long term. You won't get rich, but you'll gain pretty reliably. My Costco stock has fluctuated, but the overall trend has been steadily upward.

Second, it seems as if people start unloading stocks at the first sign of trouble. Doesn't this pretty much amount to a "buy high/sell low" strategy...exactly what you DON'T want to do?

Third, my personal feeling is that I only use money I wouldn't mind loosing. Some people play the slots. I play stocks (on a very small scale). It's fun for me, and the odds are much better.

[Captain Angry]

9. Some answers.

1: You gain nothing until you sell. If you're holding stock in a company for the express purpose of selling it at a profit, you need to follow the stock closely. If the company does something stupid, it could lose significant value very quickly.

Look at the dot-com era. People called themselves millionaires, yet they never sold at the high prices. I try to buy companies that have no business being at the price they're at. My best call so far was McDonalds. I bought at $12.00 thinking that their real estate alone made their stock worth $20-something. I sold when it hit $36 since it was no longer underpriced to me.

So, you have to decide for yourself, how far can the stock realistically go? Could the money be reinvested in something safer and more profitable, etc.


2: That is exactly why some people lose so much. They don't know what they're doing and panic when the news tells them to panic. Keep in mind that when the big money people are on TV telling you something, many have already invested. The new influx of people who think it's a great idea pushes the stock up further, and the talking heads sell. When the stock goes back to reality, people lose big. Ask the Enron employees who were told (ON VIDEO) that they should be investing everything they could into the stock. This while those telling the employees to buy were selling.


3: That's one way to go. But what about the rest of your retirement savings? Is it invested wisely? That's a rhetorical question, I'm not asking for an answer, just bringing it up. I have money in a 401(k) from my old employer. I have money in a Roth IRA, I have money in savings, I have money in the stock market, I have other investments as well. I constantly re-evaluate the holdings. I am not expecting Social Security due to my age. I am not anticipating finding work any time soon either, which sucks since it means I further deplete my savings.

I do sort of gamble here and there. I will read about a company that holds a patent for instance. If they win a lawsuit against Toyota for instance, their stock goes from $2.50 to $100.00 by virtue of their cash on hand all of a sudden. So I might buy $250.00 worth. But that's rare.

[wryter2000]

17. Thanks

I do have a very generous company 401k. It's invested in a fund that, again, has fluctuated but overall has risen over the years.

[magellan]

10. Thanks, Cap'n

That was my immediate concern when hubby asked me to explore this. The suggested investments were in oil (USO), agriculture (DBA) and another one he can't recall right now. He's also considering investing in newer alternative energies like solar and wind.

We'd only be interested in small investments -- literally a share here and there -- where the long-term trend is upward. If the dollar miraculously recovered, Iran agreed to give up its alleged "nuclear ambitions", and the speculative crowd abandoned the commodities markets for good, there's still Peak Oil and the effect of climate change on food supplies to come down the pike. That's basically what we're looking at.

You make some very good points and I appreciate the advice.

[Captain Angry]

13. Keep in mind that if you're buying single shares...

That a $10.00 share of stock really costs $10 + the cost to buy it from the broker. When you sell it, the selling price is really the price sold - the commission.

If commission is $10.00 a trade, you would need the stock to go to $30.01 to make one cent in profit in that situation. Obviously that spreads out if you buy more shares, but keep the math in mind.

[magellan]

15. Good point, thanks for bringing that up. n/t

[wryter2000]

4. I use sharebuilder

www.sharebuilder.com

I don't know if they have all stocks, but I bought Costco, Barnes and Noble, and Boston Beer Company (Sam's) from them. Trades are $4 each.

[magellan]

12. Cool, just the info we're looking for on these firms, thanks!

:hi:

[TechBear_Seattle]

7. Speaking as a licensed broker...

Generally speaking, you need to find a broker to conduct the sale. This is because almost no stocks are actually issued in certificates anymore, and even then, certificates are not negotiable. Ownership is maintained on the books of the issuing corporation, so they must be notified very quickly when there is any kind of transfer. Few private individuals have the know-how and time to manage this reporting.

So, what you do is contact a brokerage firm, either in person or online. As a first time investor, I strongly urge you to do this in person, as online services make assumptions as to your knowledge and experience that probably are not correct for you. Depending on the investments you want to make, having that kind of expertise at your disposal will probably be very helpful in the long run.

New clients will be required to provide a lot of information. Some things, like your SSN and physical address, are required by law under the PATRIOT Act and earlier laws which seek to prevent money laundering and other illegal activities. Some information is required for regulatory reasons rather than legal; things like your current income and net worth help your broker help you make decisions suitable to your situation.

My company contracts with Pershing to act as our clearinghouse. That means that Pershing maintains a large inventory of securities and promises to sell from and buy for that inventory. When we engage in a trade, we are guaranteed that they will take what we have, and that they either have what we want "in stock" or will get it for us in a timely manner. They make money by charging a fee for that service.

How we work is: A new client comes in to one of our brokers and signs up. Once the paperwork has been filed and the account has been set up, the client can contact the broker and place an order, say, for ten shares of Microsoft. The broker then calls our back office, where I work (in the IT department, but I am licensed :hi:) One of our operations staff places the order with Pershing via our computer network. The trade will settle on the fourth business day. What that means is that if you place the order on Monday, it will be settled on Thursday. By the close of business on Wednesday, you must have given the purchase price of the stock, plus the transaction commission, to your broker. As of Thursday morning, you are the proud owner of ten shares of Microsoft stock. If the purchase was made on a Tuesday, you must have the money in by close of business on Friday and you do not become the owner of record until Monday morning, maybe Tuesday if Monday was a market holiday. On the other hand, if Friday was a market holiday, you have until close of business Monday to come up with the cash.

As for investing in oil and agriculture... I am required by industry regulations to say that I am not giving personal advice; I am only speaking in general terms here. :eyes:

As a rule, any time money programs start telling regular investors to invest in this industry or that market sector, that industry or sector either already peaked or is on the verge of peaking. The time to have invested in oil would have been two or three years ago; right now, oil has reach an unstable point and market forces will start bringing the price down. If that happens, then the best you can hope for is for your money to be tied up and unusable, perhaps for years, while you wait for the price to go up again. At worst, you will be forced to sell your stock for a major loss.

Small investors rarely make money from commodities. It is very risky and margins are usually so small that you need to invest a huge amount in order to see much of a return. Depending on your individual situation, you may be better off buying blue chip stocks (ie stocks in large, established companies), shares of a mutual fund or even life insurance annuities. Speaking with a financial advisor would be your best bet. The very last thing you want to be doing is helping others get rich by buying into their get-rich-quick investment schemes.

[magellan]

14. That was a fantastic read

I've shared the link to this thread with hubby and he's now reading and inwardly digesting too. He just wants me to emphasize that we're really only looking to buy literally a share here and there with a long-term outlook, as we feel Peak Oil and climate change will induce general upward trends on oil, alternative energy and agriculture.

We do NOT want to help others get rich by being their mugs; hubby knows I'll harangue him mercilessly if he doesn't do his homework on this. ;)

Thanks for sharing your knowledge!

[DemReadingDU]

19. I have bought a few shares in companies using DRIP

Depending on the company, they may or may not charge a fee for this service. Every month I setup an automatic deduction such that a few shares were bought.

[thoughtanarchist]

8. You may also want to drip...

DRIP stands for Dividend ReInvestment Plan.

It's a cheap way to invest small amounts over long periods of time.

It is a good way to start if you have a small amount of cash. The link below will take you to a service that will allow you to enter into individual drips for a variety of companies. The terms of the account vary depending on the company you buy, but many are cheap to get started, many allow dividends to be reinvested for free, and many charge only a small sales fee. Great for getting started in long term investments.

www.computershare.com

[magellan]

16. Brilliant, thanks! n/t

[newfie11]

18. There are some large companies that you can buy from directly without going through a broker

I have also used TD Ameritrade to buy stock.