Penny Seeds

So, you’ve heard from everyone that you need to get into stocks, but you have no idea what a broker is or why you need one? Share builder is a great start for you to get into the world of trading!

If you want to buy stocks then you need a broker - bottom line. These people negotiate your market deals, but there’s two kinds to choose from. I have what’s called a ‘discount broker’ which may sound bad to some, but that just means they do less of the work, and so take less of your money.

They will carry out your trades for you, but they don’t do any actual stock picking. That chore is up to you, and that’s the way I like it! Depending on your preference, and experience you can choose more or less ‘help’ from these parties.

Sharebuilder is owned by Ing Direct, and is my broker of choice. They’re a good option if you’re a new investor who either doesn’t have much money; or wants to start off investing small. You can invest in normal everyday stocks, or choose one of their funds to dump some cash into. They have a good amount of research, and education tools available right on site, and if you open a free electric orange checking account with their banking branch they’ll cut you a deal on express funding for their stocks.

The trade prices are fairly cheap too. You pay a flat rate of $9.95 for a real time trade, and you can also get what’s called an ‘automatic investment’ trade for $4. What’s the difference? Well, a real time trade is a trade that’s placed any time during normal market hours for the price that is specified at the time of purchase. If the market is closed then that transaction will happen at the start of the market day. Keep in mind that this applies to only one stock - Not multiple ones. It’s not like going through the store, and tossing some of everything into the cart.

“Let’s see.. I’ll take some microsoft, some Intel, and a sprinkle of google!” If you were to buy those three stocks you would pay the $9.95 for each of them - Not for them total. You can buy however many shares as you want for the flat rate though; so the more you ’spend’ the more you save on fees technically.

An automatic investment is one you can schedule to happen on Tuesday of every week. You select the number of shares you want, the occurence amount, and Sharebuilder will automatically purchase shares for you. You can choose to only have a one time transaction if you just want to save cash on fees though. The only downfall to this method is that you don’t always get the best market price since it’s not a real time trade. You may end up paying the high price for the day which could be a big difference depending on that holding’s fluctuation.

If you’re not sure what you’d like to invest in you can always use some of their research tools. Currently, I’m wanting to collect some cheap stocks that are paying dividends. Why? Because I can pick up a good deal of shares for a cheaper holding. If something pays dividends that means that you’ll recieve a yearly cash amount just for holding that company. It can be any amount, but you’ll be paid for each share regardless of what the individual shares are worth themselves. Typically this is set to re-invest in more shares, but you can choose to collect it if you want to.

For example, General Motors (GM) is paying $1.00 per share. If you have 1000 shares in that company then at the end of that time period you’ll get $1,000 reinvested in your holdings. This can add up over time if that amount remains constant. Some people make a modest living just from the dividends they gather from stocks.

You can use research pages to view performance charts, highs and lows for the day, RSS feeds on company news, and manage a watch list in your account of stocks you’re interested in for later.

If you’d like to sign up for Sharebuilder you can use this link. If you do both of us get a $25 bonus in our accounts. : )

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