When you’re new to stocks, everything is daunting. Here are simple steps to buying stock for the first time.
- Decide what to buy. Don’t just buy stock because you “like” a company. Don’t blindly buy what your broke uncle said is “gonna be big next year.” It should have proven history of growth year over year.
- Decide what brokerage/site you want to use. For whatever reason, I choose TD Ameritrade, but there are so many to choose from. Just choose one with free trades. If trades aren’t free, it’ll cost you a commission every time you buy or sell shares.
- Get comfortable with the lingo. Once you’re in the app or site, and you’re ready to buy your first shares, you’ll run into a lot of language you’re probably not used to, e.g. order types. As a newbie, you will probably stick with market order type, which means to buy (or sell) a stock at whatever price it is currently trading at.
- Research upcoming key dates with the companies, e.g. earnings calls. You may or may not want to buy stock in a company having an earnings call the following week. You have to read and see whether they’ve been hitting their past quarterly numbers.
- Learn the tax side of things. Most of the time, you have to pay taxes on any earnings from selling stocks (surprise!). If you owned the stock for a year or longer (called “long term capital gains”), you’ll generally pay less tax on your profits than if you owned a stock for less than a year (“short term capital gains”).There are some exceptions depending on income bracket. In 2019, if you made less than 40K, you don’t need to pay taxes on your earnings from stocks you owned for more than a year. If you make less than 40K and sold a stock you owned for less than a year, you owe 10%. Capital gains tax charts vary from 0 to 37% according to income, so keep on top of these as they change occasionally.