Three Tips for Buying Stocks on Your Own

When you first start trading stocks, you’re faced with a ton of choices and new terminology. One of the first and most important decisions you have to make is whether or not you’d like to use a traditional stockbroker. In order to make the best choice, you should research your options and assess your unique needs. Keep reading to learn more about your options for trading, the benefits of trading broker-free, and tips for how to handle your investments on your own.

How to Make Trades

When it comes to buying and selling stocks, you have several options to choose from. To facilitate the process, you can use one of the following:

  • Full-service broker: Full-service brokers are professionals who work with you and your goals to develop a long-term financial plan. Aside from helping you with your investments, they can assist you with things like budgeting, retirement planning, and estate planning. If you’re just getting started on the stock market, this kind of assistance and attention can be extremely beneficial, but it comes with its fair share of fees and hefty commissions.
  • Discount/online broker: Online brokers are much cheaper, but they offer very little in terms of personalized assistance. For the most part, you manage your investments on your own, but there are usually helpful resources and investment-related links available if you need them. If you are happy with an online service, look around for the best online stock broker uk.
  • Direct stock purchase plan: If you’d prefer to handle your trades completely on your own, you can use a DSPP. This type of investment plan allows you to purchase shares directly from companies and at a much lower rate. Most of the time, companies and traders use Computershare as their transfer agent, so you can use it to search for and find prospective investments.

Benefits of Trading Stocks on Your Own

Image via Flickr by SimpleFX

In the past, people needed stockbrokers to give them access to the market and the information they needed to make smart trades. Now, technology and other developments have made it possible to trade without a broker. In fact, doing so allows you to enjoy many different benefits, like:

  • You can increase your profits by eliminating the fees associated with trading using a broker.
  • You can learn more about the market and grow your investment skills.
  • You get direct access to participate in responsive trading.

Strategies for Buying Stocks on Your Own

Here are some tips to help you effectively identify promising investments:

  • Search for growing companies. You can determine whether a stock is able to give you a high return by evaluating both its past and future earnings growth rates.
  • Assess the value of the stock. The price-earnings ratio, or P/E ratio, allows you to determine whether a stock provides a reasonable value at its current price. To calculate the ratio, divide a stock’s current share price by its annual earnings per share.
  • Look into the company. Before investing in a company, it’s important to take some time to research its management, balance sheet, and industry.
  • Identify red flags.  Check insider trading information to look for insiders who might be dumping large amount of shares.  This is especially an issue before earnings are released.

Investing is always a risk, so you should evaluate and weigh all of your options before making any big decisions. Ultimately, the best choice for you is one that fits your budget and goals.