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Starting A Portfolio by Buying Stocks Online? Don’t Borrow Money To Do It

You Need a Level Playing Field

Traditionally, buying stocks through a broker meant pinching and saving your pennies for many years before being able to invest in the stock market. If you didn’t have enough money to start already if you wanted to start quick, you needed to borrow money or buy stocks on credit. This is better known as buying on the margin.” However, the convenience and ease of the Internet has leveled the playing field, allowing just about anyone to be able to invest in the market with less money than ever before. However, in order to avoid losing your shirt, you need to have a basic knowledge of investing before attempting to invest online. Here are some tips:

Buy Direct

There is one method of investing that is not talked about or marketed much because it does not earn money for brokerages, which is buying stock directly through the company itself, or through a stock management site such as ComputerShare.com. A lot of large companies allow it, and the entrance cost is lower than using a broker, whether the brokerage is online or not. In fact, you can get started with as little as $ 250, and with minimal ongoing investments of $ 25 per month. Investing in this manner can help you to avoid traditional fees and commissions that typically come with a brokerage, and that means you can keep more of your money. If you are just getting started with investing, this may be the way to do it. Please, learn about investing before you go this route.

Brokers Can Help

As with anything you choose to do in life, if you do not understand how to do it, you will need assistance with the activity. Simply put, if you do not know how to invest properly, then you will need to find a reputable and honest broker to assist you. I say reputable and honest because there are brokers out there who will not have your best interests at heart and will leave with no money or assets to live on. If they’re pressuring you to invest in something you don’t understand, they probably have their interests in mind over yours. Keep in mind that, according to the Securities Exchange Commission (SEC), brokers are not allowed to sell you any investment or product that you cannot reasonably afford.

You’ll need to borrow money just to survive if you decide to invest with a cheating broker. It is crucial that you interview each thoroughly before you hire a broker to handle your money. Also, many brokerages are going online, with many available that are claiming to be better than any other company. Research as many as you can before choosing.

Watch Fees!

Know the fees that are associated with your account, as many times, brokers do not want to discuss them with you. They also may not know some of the fees, because they are told what to tell you. Only those involved with setting up the products will know all the fees. Don’t assume the fees you are quoted originally are going to stay the same. One online brokerage, in their fine print, states, We reserve the right to add, remove or change brokerage charges as deemed necessary. According to the SEC, if fees are changed, you are entitled to know about them at least 30 days in advance. Keep track of the charges that get assessed, or you could be losing more than you realize.

Do Your Homework

The best protection against the need to borrow more and more money to invest is to do complete and thorough research on any company or brokerage. Learn how to read a prospectus, including the jargon that may confuse you. If you don’t know what a term means, Investopedia.com has a complete glossary as well as several beginner investing articles to assist you.

You also must know the difference between market value of the share price and the actual value. These are not the same, as the market value is always based on the emotions of investors, while the actual share value is based on the company itself, or rather the price-to-earnings ratio. Put simply, the more a company makes, the higher the price per share is.

Everyone needs to borrow money occasionally, but when it comes to investing online, the less money you borrow, the more money you can make.

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