CHAPTER 14
HOW TO BUY SHARES?
We have already discussed this before, but just to refresh it further, in ancient days dealing in trade market was only the privilege of the rich people, but now it is not so a common man is also a part of the trade market.
You can buy shares through any of the following ways
Stock broking through bank, custom stock brokers over the telephone or on line trading through internet.
If you have no idea how to go about investing and really need a lots of help then in that circumstances , you can go for ADVISORY SERVICE , where in the stock broker looks in to you individual account and advices you on buying and selling
But , if you wish to hand over the entire thing to someone else, then in that case you can go for DISCREATIONARY SERVICE, in this there is certain strategy between you and the broker which is agreed upon and the stock broker takes all the decisions of buying and selling on your behalf with your money. This type of service risk factor is more.
You can categorize the brokers in two major types,
Discount brokers – these brokers will collect a certain amount of annual fee form you and will only carry out what has been told to them, over the phone, in person or on the internet. They would give ZERO advice to you.
Full Service brokers- these brokers give you recommendations and advices on which stocks are good to buy, which will yield profits and which stocks are overvalued. They provided these services with a little higher fees and sometimes even commissions
CHAPTER 15
HOW TO PICK A BROKER
Now, the question arises is HOW DO I PICK BROKER?
You should first decide whether you want a telephoning broker or he should be an online broker as well. Then next you should find the following factors.
ü Quality of information
ü How fast is the execution of trade
ü The markets available
ü Costs attached with them
ü Check how much equities they would pay
ü Would they provide with CFD’S
ü How much fees would he charge on the unused cash in your trading account
ü How much discounts. Penalties will be there on frequent /infrequent trading.
WHAT ARE THE QUESTIONS YOU WILL ASK DISCOUNT BROKERS
How much do they charge for buying and selling shares?
Do they have any subscription fees
How do they buy and sell shares
Do they deal with telephone and internet both?
Do they offer trade discounts
Do they offer and added services like alerts, dynamic market data etc.
CHAPTER 16
GOLDEN RULES OF BUYING SHARES
9 golden rules of buying shares
1. STICK TO THE RULES- Always remember that the stock prices would go up and down, what is needed is to stick to your strategy which you have planned. Swaying away from the rules would only bring losses.
2. DIVERSIFY – Do not invest all your eggs in one basket; invest in various sectors not just the one which is mining.
3. BUY SHARES THAT SUIT YOUR TRADING CYCLES – if you are buying shares for a long term it definitely wont suit you if you are short term trader and it goes other way also… short term shares wont suit the long term trader as well.
4. KNOW YOUR RISK TOLERNACE – A speculative share has a different risk profile as to out of favor “ blue chip “.Allocate your capital according to your own risk tolerance and the risk profile of the trade.
5. DON’T RUSH IN – The market will be still there waiting for you when you are ready to trade. Learn about the market before you start trading particularly the new investors. The best way to start is with the PAPER TRADE, so as to learn the basics first.
6. DO NOT GET GREEDY – Don’t think that you will be a millionaire in a day, be practical and not over realistic. Don’t think it’s very easy, as it’s very easy to lose money also in the trade market.
7. ONKY INVEST WHAT YOU CAN AFFORD TO LOSE – if the shares are the cause of your worries then definitely either you have invested in the wrong ones, or you have far too many to handle, so SELL them , nothing in the world d is more important than your peace of mind.
8. NEVER EVER CHASE SHARES – exercise patience, never run behind the shares and purchase beyond your limits, because the time will definitely come when you will be able to buy them within your limits.
9. KEEP ACCURATE UP TO DATE RECORDS- The most important of all, for penalties for not declaring your profits and not paying the capital gains are too much high. So stick to the rules.
