Home
| Work & Business
| Investments & Stocks
| Buy Stock
| The Best Ways to Buy Stock Online
The Best Ways to Buy Stock Online
by Carmelo J. Montalbano
-
Overview
The best way to purchase stock online is through a full-service broker with minimum fees. There is a wide range of brokers available and several should be able to meet your needs. Other important issues to consider include the ease of use of the trading platform, the ability to discuss questions with trained personnel, and low commissions for executing trades.
Trade the Trend Until It Bends
-
Choosing an Online Broker
Decide what type of investor you are--for instance, a long-term trader or short-term trader, or a trader who likes to hedge with options or write covered calls. Each investing preference should move the investor to a broker who can meet those needs. Investing online is about choosing an appropriate broker whose product and platform is most similar to your needs. Research comments about brokers. Learn what in-house and third-party research is available. Learn if the fee structure is based on the number of trades each month or a minimum number of trades. See if the trading platform is easy to use and can prevent unintended or mistaken trades. Remember that mistakes entered when trading are at your expense until corrected. Learn how limit losses and trailing losses can be entered to prevent small losses from becoming large losses.
-
Stock-Buying Strategies
There are several stock-buying strategies that can be used in an online account. Investors can simply buy the stock they choose online. Investors can buy at the market or going price, or can enter a bid for a stock below the current price and wait to see if that price is reached. Investors can also use derivatives to buy stock cheaper than the current market price. Investors can buy convertible preferred stock. Convertible preferred pays a dividend and at a defined price can be converted by the issuer to common stock. Investors can also buy warrants, options and detachable stock units that convert at a specified price--called the strike price--into shares of common. In each case the investor receives dividends or premium payments that effectively reduce the price of the common stock.
-
Buying Stock Through Stock Funds
Many stock funds that are closed-end funds trade at a discount to their net liquidation value, especially during bad markets. These funds post two values every day: the value of the stock in the fund and the current trading price on the exchange for the fund. The difference between the two is called the net premium, or discount from net-asset value. It is not unusual to see a discount to asset value of 20 percent or more. Investors who buy these companies, listed mainly on the American Stock Exchange, receive an immediate discount on the value of their investment. If the stock fund does nothing while the stock price and asset value converges, you have made a substantial market gain.
