Category: Stocks for Beginners

Stocks for Beginners is a category where young and beginner investors and traders can find many useful examples of how to start investing. For example, when is the right time to buy stocks, or how much money they need to start investing.

Traders-Paradise wants to show to the visitors that stock investing isn’t necessarily expensive. If you’re a beginner, for example only $100 is good for a start. That is very well explained in our posts in category Stocks for Beginners.

Even how to start investing and how long should you hold on penny stocks.
Investing is interpreted as the act of allocating money or capital to an attempt to obtain an extra income or profit. As savings, investing is money for the future. You invest with the hope your money will grow.

Investing in the stock market is the most popular way for beginners to get investment knowledge. In this category, beginners can find how to start, what app to use, all about robo advisors, etc. Also, Stocks for Beginners category will tell you everything the Traders-Paradise’s team knows about companies good for the beginners.

Everything about how to start that journey, how to pick the stock, what criteria to use, what are the best strategies for beginners.

We’ll explain to you, our readers, what are the best stocks to buy for beginners. Also, how to make your first steps in the stock market. You’ll know what is best to invest in.

“Traders-Paradise” Team wishes you happy and fruitful investing!

Buying Stock Without a Broker – Ways to Do

Is it possible to buy stocks without a broker? Why shouldn’t be? Here is how to do that.

By Guy Avtalyon

Buying stock without a broker offers some advantages and disadvantages. Young investors are worried about investing in the stock market.

The financial crisis of 2008 strongly disturbed our formative professional years. We can still feel its specter lingers a decade later. Only 33% of millennials own stock, according to a 2016 Bankrate survey.

The other survey, a 2015 Harvard University survey found that just 14 percent of millennials trust Wall Street.

As any good stockbroker or experienced investor can tell you, you can find bad brokers more often than the good one.

Being “bad brokers” means those who put their own interests above that of their clients. We have a list of bad reputation brokers here on Traders Paradise’s wall of shame.

So, we must consider how to buy stock without a broker.

However, that worst brokers do this in a perfectly legal way, by causing desire and weaknesses to their clients’.

How do they do that?

Here are three main practices that bad stockbrokers practice. They claim to their clients that aiming for stability rather than growth. Wrong!

Usually, they force clients to obtain an income from two different sources, typically in an illicit way. Also, some of them are emphasizing low-risk, low-return, high-fee structured products in client accounts.

That’s why many new investors ask how to buy stock without a broker.

Because of the lack of confidence in brokers, many millennials don’t have the startup cash to fund an IRA or a brokerage account. That typically requires either automatic monthly payments or a minimum investment of around $1,000-2,500, plus commission fees of around $4-7 for every trade.

For those people who want to go down this path to business ownership, one option can be to check out direct investment plans.

But it is with varying degrees of success. Of course, there is no requirement that you have to work with a broker to invest in stocks or particularly equity funds.

Buying stock without a broker offers some advantages and disadvantages.

You will need to measure them based on your personal situation. But our goal is to provide you a good handle on how to invest without a broker.

But it’s up to you to make a decision about whether such an approach is appropriate for you. You have to know your unique circumstances and preferences. Because there is no unique solution for everyone.

Let’s say, you had a broker but you noticed that your broker sometimes uses unfamiliar words and phrases to describe investment concepts. Some of this stockbroker jargon is simply a shorthand that brokers use amongst themselves. They use them to refer to familiar situations without having to go into any detail on the underlying concept.

Your head is going to explode hearing every time some strange words that cause suspicions.

But investing can be simpler if you buy stock without a broker. Just by investing in shares through a company’s direct stock purchase plan.

The first and easiest way to buy stocks without a broker

It is when companies, often blue chips, fund a special type of program. It is called a DSPP or Direct Stock Purchase Plan.

The main goal of these plans originally was designed as a way for businesses to let smaller investors buy ownership directly from the company. In the beginning, they were working through a transfer agent or plan administrator. They still do the same. Most plans allow investors to buy stock without a broker if they agree to either have an amount taken out of their checking or savings account every month for six months. Often $50 is the acceptable minimum. The other way is to make a one-time purchase, which will cost you $250 or $500.

These plans are surely not as comfortable as getting a broker. You can’t just buy and sell a variety of company stocks at any time, for instance. Plus, you won’t have a diverse portfolio if you only own stock from a few companies. Moreover, with some plans, you won’t even escape fees. So, you have to be careful about what you sign up for.

This means trades without commission

But we have to say, direct stock plans are a good way to experiment with the stock market without putting too much money into the game.

Ordinarily, the plan administrators use your cash to buy shares of the company. It can be on the open market or freshly issued from the business itself, on predetermined dates. The average cost of the purchases is weighed out.

Also, they can use some other methodology to equalize the cost among investors. And the direct stock purchase plan statement arrives quarterly. All with a listing of the number of shares you own and dividends you receive.

Some direct stock purchase plans trades without commission. Others charge small fees. Usually $1 or $2 plus a few cents per share, for each purchase. A larger fee, about $15 and a few cents more per share, for a sale. This is a lot lower than what you have to pay at a full-service broker.

Buy stock without a broker by taking advantage of the dividend reinvestment program

In this way, you can add additional shares to your holdings.

This means to enroll in a stock’s dividend reinvestment program or DRIP. DRIPs provide you to take cash dividends, paid out by the company you partially own. And you may plow them back into buying more shares, charging either nominal fees or nothing at all. It depends upon the individual plan.

Have this on your mind. For a typical stock, that’s a lot of transactions over 25 or 50 years on which you aren’t paying commissions. The typical stock may pay out a dividend four times per year. So, count! DRIPs usually come with cash investment options that resemble direct stock purchase plans.

This opportunity means you can regularly have money withdrawn from your account, or send in one-time payments whenever you like.

A lot of long-term investors have become skilled at building wealth through these types of accounts. Buying stock without a broker for years, even decades is a very nice way. You must be heard stories about some housekeeper who left behind $5 million opulence.

They did it just on the way we said above.

You can buy stock without a broker by obtaining a single share through a specialized gifting service

Unfortunately, the financial industry’s decision is to move away from paper stock certificates. And this has become a bit shaky.

But, up until recently, you could use companies that allowed you to buy a single share of stock to get your name on a corporate shareholder list.

Hundreds of companies offer these plans, but each has its own rules for eligibility. It’s normal to be careful about investing in stocks. But some estimates that the average millennial would lose about $3.3 million in retirement savings by avoiding investing completely. Direct stock plans are an easy way to learn the basics and establish a portfolio.

All without spending money, time, and nerves on brokers. Anyway, buying a stock without a broker may be a clever move for investors.

Learn how to trade in the financial academy.

23rd January 2019
The minimum amount of money you need to start investing in the stock market

2 min read

There are no rules that tell the minimum or maximum amount of money you need to start investing.

It may be less than you think.

Let’s say you have $1000 aside.

Is that amount enough to enter the world of stock investing?

Yes. Even $5 is enough to start investing.

But if you can invest more it is better. For you.

But before you jump head first into the world of stocks and bonds, there are a few things you need to consider.

One of the biggest considerations for investors with a minimal amount of funds is how to go about investing.

Here are some questions to answer before hitting the “buy” button.

First of all, what are your goals?

You have to define what you want your investments to accomplish. It will help guide you in the right direction. That’s advice from investors and experts.

What does it mean? You have to create a kind of road map. Like you are traveling to some unknown area and you need Google maps to show you the road.

So, let’s go back to the main question.

Do you want to save for retirement? For a new home? Or for a kids college fund? The answer will determine how risky you want to be with your money.

There are some very low priced stocks available.

You can begin investing in the stock market with a lot less money than many people think.

Here’s how much you need.

The minimum amount of money you need to open an account

Some online discount trading platforms have account minimum requirements. Minimums for several popular ones range from as little as $0 to $2,500.

It is for the self-directed account.

If you want to open a traditional full-service, broker-assisted account, you will need several thousand dollars.

However, all financial institutions have minimum deposit requirements. In other words, they won’t accept your account application unless you deposit a certain amount of money. With a sum as small as $1,000, some firms won’t allow you to open an account.

If you really want to start with the small, minimum amount of money you can use an app.

They will allow you to begin investing with just $5. Some apps offer you a choice of several funds to invest in. You basically end up owning part of the stock.

When you get to $5, the app invests that money for you into a diversified portfolio. In essence, it is a mix of stocks and bonds.

The other question is the minimum amount of money you need to buy stocks.

The minimum amount of money to buy stocks

If you want to buy a stock, you’ll need enough money to buy one or more shares of that stock. And you have to add the cost of brokerage commission.

Yes, we know you would like to start your investing with little money. But you must be aware. Stocks trading below $5 per share can be extremely speculative and dangerous. Usually, it is not worth dabbling with them.

Truth is that a single share can trade from pennies for some companies to hundreds of thousands of dollars for an A-class share.

But many companies’ shares cost, say, between $10 and $100 individually.

There are some very low priced stocks available. But before investing in the share market you should know some basic financial ratios.

Check valuation of stock’s price

It is equally important to buy shares at the right price points.

To earn money in share market, buying stocks at its right price is necessary.
What does it mean by the right price?

Estimating the intrinsic value of stocks requires a special skill. It isn’t quite as simple as it sounds.

There are several methods you can use to estimate the intrinsic value of stocks. Different methods will give different values of intrinsic value.

This itself is enough proof that how complicated it is to estimate the intrinsic value of stocks.

People who have the real art of estimating the right intrinsic value of stocks has become Warren Buffett’s.

You have to use financial ratios to value stocks

You can start by checking how the stock price has behaved in the last 2-3 years.

Suppose in the year 2012 the stock price was $35. After three years it has climbed to $50. That means the company has a growing tendency.

But it is also important to check if the stock price has touched overvalued levels?

You can know this in a variety of ways.

Start by comparing the stock price with its book value. If the Price to Book Value ratio is less than 1.5, we can say that stock has not touched overvalued levels.

If the book value of a stock is $100 and it is the market price is $160, it means its P/B ratio is 1.6.

This is a hint that stock price has touched its overvalued levels.

The amount of money a broker requires to open an account is the answer to the minimum amount. For a host of reasons consider opening an account with one that has a local office.

Here is a more expansive look at things to consider when beginning investing.

If you want to begin investing, consider reviewing at least some of the major tenets of personal finance.

For example a multiple-month living expense safety net and paying off high-interest debt, e.g., credit cards, before beginning investing.

You don’t have to invest all amount at once or in one stock. Rather diversify your money in different companies and different time of purchasing stocks.

YOU WOULD LIKE TO READ How to Become A Trader or Investor in Just 10 Minutes

How to collect the minimum amount of money

Begin to set aside a sufficient amount of money to open a brokerage account. Consider $1,000 or more as a minimum amount of money to do so. Lesser amounts, e.g., $100, 500, are insufficient to invest effectively.

Investing is a lifelong learning experience.

Consider investing only the money you can afford to lose.

Consider investing in stocks as part of an overall strategy that may include participation in employee retirement plans, payroll savings plans, and IRAs. There may be tax advantages to be had.

You have to recognize the differences in philosophies and approaches to investing versus trading.

Investing means long-term, but trading is short-term.

Be aware that trading stocks as a novice are most likely a recipe for disaster. Day trading is not recommended.

The literature is filled with evidence that the vast majority of those new to the market quickly lose significant money.

Do take the time to read and study first.

Risk Disclosure (read carefully!)

9th January 2019
How to research and choose stock?

Here you’ll find a full explanation on how to research stock.

By Guy Avtalyon

This is the main question: how to research stock? Investors have a name for all types of research, one of them is fundamental analysis. Fundamental analysis involves looking at numbers and other measures in a company’s financials as well as assessing the less tangible aspects of a business.

This approach can help you decide whether a stock deserves a spot in your portfolio. Pick a company you’re interested in. Read current and past annual reports and letters to shareholders. Collect the numbers and financial ratios and compare the company’s performance history to the industry and its rivals. Then work through the list of qualitative questions.

How to perform a technical analysis

Technical analysis is a way to understand market psychology or what are investors’ feelings about a company, which are manifested in the stock prices. Also, technical analysts are mostly short-term holders, concerned about the timing of their buys and sells. If you can identify a pattern, you could have a chance to predict when stock prices will fall and drop.

This is useful in how to research stock because it can inform you about when to buy or sell certain stocks.

The technical analysis makes use of moving averages to track security prices. Moving averages measure the average price of the security over a given period of time. This helps traders to easily identify trends

Use patterns as a tool on how to research stock:

Patterns include known price boundaries in the market price of a stock. The high boundary is known as the “resistance.”

The low boundary is called “support.”

Recognizing these levels provide a trader to know when to buy (at resistance) and when to sell (at support). And there are some specific patterns that are also noticeable in stock charts.

The most usual is “head and shoulders.”

This shows a top price then drops, followed by a higher peak then drops. And eventually follows a peak alike in height to the first. This pattern indicates that an upward price trend will end.

There are also inverse head and shoulders patterns, which mark the end to a downward price trend.

What is the difference between a trader and an investor?

An investor search for a company with a competitive advantage in the marketplace that will provide sales and earnings growth over a long period. A trader tries to find companies with a price trend that can be utilized in the short-term.

Traders typically use technical analysis to identify price trends. Investors typically use fundamental analysis, because they are focused on the long term. The decision, will you be a trader or investor, will determine you how to research stock.

What orders do traders use?

Orders are what traders use to describe the trades that they want their brokers to make for them. There are a lot of different types of orders.The simplest type of order is a market order, which buys or sells a set number of shares of a security at the prevalent market price. A limit order buys or sells a security when its price reaches a decision point. For instance, placing a buy limit order on security will order the broker to only purchase the security if the price fell to a some defined level.

This allows a trader to specify the maximum amount willing to pay, a limit order guarantees the price the trader will pay or be paid, but not that the trade will happen.

Stop order tell the broker to buy or sell a security if the price rises above or falls below a certain point. But, the price that the stop order will be filled at is not guaranteed because it is the current market price.

What is short selling?

Short selling is when a trader sells shares of a security that they do not yet own or have borrowed.

It is typically done with the hope that the market price of the security will fall. As a result, the trader can buy the shares at a lower price than sold them for in the short sale. Short selling is useful to exit a trade in profit or to hedge against risk. But it is very risky.

This should only be done by experienced traders who understand the market thoroughly.

What matters is developing greater self-confidence and knowing the limitations of what you can really learn and find out.

Also, there is a combination of stop and limit orders called a stop-limit order. When the price of the security passes a certain level, this order specifies that the order becomes a limit order rather than a market order as it does in a regular stop order.

21st August 2018
How to Buy Stock Options??

Buying and selling stock options isn’t just new territory for many investors, it’s a whole new language, new world.

By Guy Avtalyon

Let’s see how to buy stock options. They are not new, there are historical findings that confirm their use during the Antiquity period.

You might suppose these options markets are another superfine financial instrument that Wall Street gurus created for their own dishonest purposes, but you would be wrong.

Actually, options contracts did not originate on Wall Street at all. These types of instruments exist for thousand – long before they began officially trading in 1973 under the name of the Chicago Board of Options.

Since you have a better understanding of what options are (calls and puts) let’s look at how to buy a call option in a more detailed explanation.

How to buy stock options

At first, place, how to buy a call option. To buy a call you must first recognize the stock you think is going up and find the stock’s ticker image.

When you get a quote on a stock on most sites you may click on a link for that stock options chain which lists every actively traded call and put option that exists for that stock.

Let’s go step by step:

1) Identify the stock that you think is going to go up in price
2) Review stock Option Chain
3) Select the Expiration Month
4) Select the Strike Price
5) Determine if the market price of the call option seems reasonable

Are there the options for all and every stock?

Well, this is a fantastic question because options cannot be traded for all stocks. Some of them don’t have the options. You can buy options for only the most popular stocks. They are tradable. Also, there is no possibility to always buy a call with the strike price that you want for some options.

Strike prices are generally, in intervals of $5 e.g. $30, $35, $40. Occasionally, you can find $34,5 or $32,5 available for popular stocks.

Also, there is no possibility to always find the expiration month you are looking for on the option for which you want to buy a call. Most of all, you will see the expiration months for the closest two months. Then every 3 months thereafter. Surprisingly, if you find the option that you want to buy a call on, you still need to make sure it has enough volume trading on it. Just to provide liquidity so that you can sell it if you decide to.

Are options frequently traded on the most stocks?

The most stock options are infrequently traded. Therefore have a higher bid/ask spread.

To buy a call you have to understand what the option prices mean and you have to find one that is reasonably priced.

If trading is at $22,5 a share in September and you are looking to buy a call of the November $32 call option, the call option price is regulated like a stock, fully on a supply and demand basis.

If the price of the call option is $0.5 then not many people are expecting to rise above $60; and if the price of that call option is $4,00, then you know that a lot of people are expecting that option to rise above $60. The most important thing to understand when you want to buy a call is that option prices are a function of the price of the underlying stock, the price, period left to expiration, and volatility of stock itself. The volatility and the expected volatility of the stock are keeping traders in different opinions and hence drives prices.
The most important\ thing to understand when you want to buy a call is that option prices are a function.

The function of the price of the underlying stock, the price, period left to expiration, and volatility of stock itself.

The volatility and the expected volatility of the stock are keeping traders in different opinions and hence drives prices.

Many genuine investors and traders wake up in the morning and sneak a peek at the stock futures to anticipate where the market will open in comparison to the previous day’s close.

What are the main characteristics of call options?

– The security on which to buy call options.

Suppose you think XYZ company stock is going to rise over a specific period of time. You can consider buying XYZ call options.

– The number of options contracts to buy.

Each option contract holds 100 shares of the underlying stock. Buying 3 call options contracts, for example, grants the owner the right, but not the obligation, to buy 300 shares (3 x 100 = 300)

– The strike price.

Strike price refers to the price at which the owner of options can buy, let’s say the stock when the option is exercised.

For example, XYZ company ‘s 100 call options allow the owner the right to buy the stock at $30, regardless of what the current market price is. In this case, $30 is the strike price (this is known as the exercise price too).

– The trade amount that can be supported.

This means the maximum amount of money you want to use to buy call options.

– The expiration month.

Options do not last forever. They have an expiration date.

Say, if the stock closes below the strike price and a call option has not been exercised by the expiration date. It expires worthless. And the trader no longer has the right to buy the underlying asset and the trader loses the premium paid for the option.

Most stocks have options contracts that last up to nine months. Traditional options contracts typically expire on the third Friday of each month. So, you must be aware of how to buy stock options.

–The price to pay for the options.

When you buy the stock for the stock price, you buy options for what’s known as the premium.

Premium is the price to buy options. In 100 XXX call options example, the premium might be $4 per contract.

It means the total cost of buying one XXX 100 call option contract would be $400 ($4 premium per contract x 100 shares that the options control x 1 contract = $400).

If the premium were $6 per contract, instead of $4, the total cost of buying 2 contracts would be $1,200 ($6 per contract x 100 shares that the options control x 2 total contracts = $1,200).

– The type of order.

Options prices are constantly changing, like stocks. So, you may choose the type of trading order with which to purchase some options contract.
There are several types of orders, including market, limit, stop-loss, stop-limit, trailing-stop-loss, and trailing-stop-limit.

14th August 2018