If you are new to and untried in the investing world, if the stock market has piqued your interest but you’ve never put your toes into the water, if what you hear and see in the news about the U.S. economy and the future of companies and civilizations around the world scares you, this is the time to start looking to equities as part of your investment portfolio.
Wait a minute! You thought I was going to say, “Run! Run fast and in a different direction!” because of the red flags mentioned with fear and trembling in the paragraph above.
I am writing this to the many new thesavvygal.com readers we have who may not have been in on the progression of articles starting a few years ago when we began this venture. If so, we wanted you new readers to come back to the beginning with us as we talk about the logistics of opening a brokerage account and learning how to do some minimal stock market investing for your future.
Whatever your investing knowledge or background, it is good for every woman — every savvy gal — to learn what the stock market is all about and how it works. Some day you may have to take care of yourself financially, if you aren’t already doing so, and this information will be vital.
We’re going to focus on stocks rather than bonds because during the decades of investing, stocks do better than bonds. A share of stock, then, means that you own a very tiny portion of the company in which you are invested. And I do mean very tiny. But ownership is ownership, and if you own one share of McDonalds, for example, you are just as entitled to go to their shareholders’ meeting and vote to make decisions as the person or institutional investor who have hundreds of thousands of shares.
So owning shares of stock means you own a piece of the company. This would behoove you to do some good research and buy only companies whose prospects are good, because that would mean the stock price would go up, not down. And you always want to buy the stocks that go up!!
But how exactly do you buy those shares, whether they are 10 or 1,000? In order to do so, you must have a brokerage account in your name. Brokerage firms are those businesses that trade stocks — buying and selling — for their clients, charging a commission (which varies from firm to firm) to do so. Decades ago, you would have to go to the bricks and mortar building, fill out an application, talk to someone who works there, give them a check, and wait for your account to be opened. Then you would call the broker assigned to your account (unless you knew the broker going in) to start trading stocks. And your commission fees would be exorbitant, because they were usually doing all the work for you.
No more. Nowadays you can pick your online discount broker, go to their Web site, fill out an application and email it back to them, wire funds from your bank to theirs, and within a few days you’re ready to trade. And there are no brokers to give you advice or guide you; in fact, by law discount brokers cannot do so. You’re on your own. Now, if this seems a bit frightening, remember that nowadays there is also a plethora of information and research available to you on the Internet. Anything available to the broker at the full-service brokerage firms is now available to you as an individual, low-scale investor.
Ask around: this is the best way to discover the online discount broker that most people use and are happy with. Yes, they do vary according to fees (some as low as $5 and some as high as $14, for the same level of services) and according to how user friendly their Web sites are. So check around, ask friends, go online to their websites, try to find the one that works best for you. You will be pleasantly surprised at how easy the online brokerage firms are to use.
Once you have identified a brokerage firm you’d like to use, fill out their application. You will do a joint account if you’re married and want your spouse on the account, or an individual account if you’re single. Mail it in or hand-deliver it along with the amount of money required to open the type of account you want (retirement accounts require smaller amounts), and wait until they notify you of the fact that your account is now ready to use. They will usually send you a password to initially gain access to the account, after which you can change it to something you prefer once you have access.
Next time we’ll talk about what to do now that the brokerage account is open!