How to Invest in Stocks

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Investing in stocks is easy, and it’s simply one of the only ways to turn a small amount of money into a large amount of money.

To put the power of investing in perspective, an early $2,000 investment in Tesla (the popular electric car company) would be worth well over $34,500 today.

1 Minute Summary

  • You need an online low-cost broker to invest in stocks
  • Always save money and choose the broker with the lowest fees
  • Ally Invest has the lowest stock trading fees in 2019 out of every broker with 24/7 customer service
  • Opening an account takes 5 minutes and there are no minimum requirements or maintenance fees
  • If you have any questions, Ally Invest has 24/7 investing support via phone & live chat
  • Consider diversifying your portfolio by purchasing multiple stocks
START INVESTINGopen an account on Ally Invest’s secure Site

Why Invest in Stocks?

To put it simply, stocks offer a way to earn income without working.

This concept sounds strange at first, but, when you think about it, money is a tool. At a certain point, when you accumulate enough money, you no longer have to trade your time for money. You can trade your money for more money.

This is the “secret” to building serious wealth. Don’t believe me? Just ask Warren Buffett, a man who has made $89 billion from investing his money over the course of his life. If you have a long-term time horizon, and aren’t worried about short-term price fluctuations, investing enables you to grow your assets…sometimes exponentially. For example, if you buy $10,000 worth of Starbucks stock, and Starbucks moves 30% higher, you’ll make $3,000 by doing nothing.

Step #1: Opening an Account

The first thing you’ll have to do before you can invest in stocks is open an online brokerage account.

The best online broker that we have found is Ally Invest, not only because Ally is offering free trades for 90 days, but also because Ally’s normal commissions are the lowest in the industry.

All stock and ETF trades start at just $3.95. Plus, every Ally client gets access to robust trading platforms and 24/7 customer service, and Ally never charges any inactivity or maintenance fees.

Step #2: Doing the Research

Once your account is opened (takes 5 mins), the next step is to navigate to the “Trade” tab on Ally’s online trading platform.

For this example, I’m going to use Starbucks (ticker symbol: SBUX). Starbucks is the most popular retail coffee shop franchise in the world, and a lot of customers and veteran investment bankers see serious value in the company.
When you sign into your Ally Invest account, the page will look like this:
TradeStation Free Level 2 Stock Quotes

Step #3: Making the Trades

Once you’ve entered the company name into Ally’s platform, real-time prices and buttons to buy and sell the stock will appear.

After you’ve selected a stock to invest in, the next decision to make is how many shares to purchase. The exact number of shares to purchase is entirely up to you. You can buy 1 share or 1,000,000 shares. You’re only limited by the funds you have available. TradeStation’s system, thankfully, won’t let you accidentally purchase too many shares relative to your account value. As a general rule of thumb, most investors never put more than 10% of their available funds into a single stock. So if you have $1,000 and a stock is $50 per share, you might want to only buy a few shares.

When it comes to placing orders, we always prefer to use limit orders, because you get to decide what price you want to buy or sell at. A market order will execute your order at the current market price. This is sort of like buying a house without looking at the offering price; for stocks, market orders are only useful if you don’t care about the short-term price movements and just want to own the stock. After submitting your order, you’ll receive a confirmation of your investment and you’ll officially be an investor!

If you want to sell your investment and close out your position, all you have to do is click on your position in your Ally Invest account and click “sell”. Of course, if you need help with anything in this process, customer service is ready to help you 24/7.

9 Popular Stocks to Invest In

Starbucks is a very well-known stock to invest in, but here are 9 other companies that you might have heard of that are also popular investments. All of these stocks are great for beginners, since these are well established, name-brand companies that have been around for decades.

CompanyStock Ticker
Snap, Inc.SNAP
Alphabet, Inc.GOOG
Netflix, Inc.NFLX
The Home Depot, Inc.HD
American Airlines, Inc.AA
McDonald’s, Corp.MCD
Ferrari, NVRACE
Ford Motor CompanyF
Johnson & Johnson, Inc.JNJ

What You’ll Need to Open a Brokerage Account

Opening an Account

It takes about 5 minutes to open an account with Ally Invest. There is no fee to open or maintain.

Verifying Yourself

You’ll probably have to answer questions about your current income and employment status.

What You’ll Need

US licensed stock brokers are required to have each client’s Social Security Number for tax purposes.

Tips for Success

Buying individual stocks is great, especially in the technology sector, but often it can be wise to diversify and buy a basket of stocks. A really easy way to do this is with an ETF. The most popular ETF in the US is called “SPY”, which represents the S&P 500 Index.

If you want to invest in the “stock market” in the US, you’ll want to buy the SPY ETF. SPY tracks the price of the S&P 500 Index. And since the the S&P 500 Index is made up of the 500 best public companies in the US, you’ll own a piece of all of them and will be very well diversified.

If you don’t want to bet on individual stocks, buying a broad market index ETF is 100% the way to go. Since 1970, the S&P 500 has gained approximately 2850%. This means a $4,000 investment in 1970 would be over $112,000 today…not bad.

Final Thoughts

In the world of finance, investing is always considered somewhat risky, but it’s also highly lucrative. As the old saying goes, “fortunes favor the bold.”

At the end of the day, buying stocks and investing is planning for your financial future. Regardless of the amount of cash you have in your bank account, if it’s just sitting there, it’s not doing anything for you. However, it’s definitely doing something for the bank, because jump at the chance to invest client balances and earn a return.

START INVESTINGopen an account on Ally Invest’s secure Site

What is Options Bro?

Options Bro is an online financial information site dedicated to providing independent, informative, and objective reviews, comparisons, and tutorials on all things finance.

Collectively, we’ve spent hundreds of hours examining the most popular financial products and tools. Bottom line, we simplify and explain the myriad of consumer financial options available today, so you can make smarter financial decisions.

Updated: Feb 15, 2019

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