Start Your Investment Journey

How To Start Your Investment Journey

Setting Up Your Own Broker Account For Stock Trading

Step #1: Choose Your Brokerage Firm

Take the time to research and evaluate each brokerage firm, so that you may pick the right firm for your wants and needs. I’m currently using TD Ameritrade which was bought out by Charles Schwab in October 2020. Charles Schwab is currently converting all TD Ameritrade account holders over to their platform. Charles Schwab plans to complete the conversion by the ending of 2023.

Below are 10 online brokers for stock trading:

Name	Fees	Account Minimum
Charles Schwab	$0	$0
Fidelity Investments	$0	$0
E-Trade	$0	$0
Merrill Edge	$0	$0
Ally Invest	$0	$0
Robinhood	$0	$0
Interactive Brokers	$0	$0
Firstrade	$0	$0
Webull	$0	$0
J.P. Morgan	$0	$0

How Should You Choose A Brokerage Account?

Take your time when deciding what type of brokerage company you want to go with. Some brokerage firms have promotions that can also help you when starting off. I decided to go with TD Ameritrade because I liked the thinkorswim app that was launched for long-term investors.

Ultimately, the best brokerage for you will depend on your specific needs and investment goals. It may be helpful to open accounts with multiple brokers to compare their services and fees, before deciding on which one to use primarily.

What Is An Online Brokerage Account?

An online brokerage account is a type of investment account that allows individuals to buy and sell securities, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs), over the internet. Online brokerage accounts are offered by financial institutions, such as banks and independent brokerage firms. They provide investors with the ability to manage their own investments, as well as access to research, charts and other investment tools to help make informed decisions.

How Much Money Should I Start Investing With?

The amount of money you should start investing with depends on your individual financial situation and investment goals. However, generally speaking, it is a good idea to start investing as soon as possible, even if you can only invest a small amount of money at first. It is generally a good idea to start small and gradually increase the amount you invest over time.

What Stocks Should I Start Buying?

The decision of which stocks to buy depends on your individual investment goals, risk tolerance, and financial situation. However, there are a few general tips that can help guide your stock-buying decisions.

1. Diversify: Diversification is one of the most important principles of investing. It means spreading your money across different types of investments, such as stocks, bonds, and real estate, in order to reduce the overall risk of your portfolio. Diversification can also mean investing in different sectors and industries, as well as different countries and regions.

2. Consider the company’s fundamentals: Before buying a stock, it’s important to research the company’s financial health and its prospects for future growth. Look at the company’s revenue, earnings, and cash flow, as well as its management team, competition, and industry trends.

3. Look for value: Value investing is the strategy of buying stocks that are undervalued by the market. This means looking for companies that have strong fundamentals, but whose stock price has fallen for one reason or another.

4. Choose a reputable brokerage: It’s important to choose a reputable brokerage that offers a user-friendly platform, low fees, and access to a wide range of investment options.

5. Do your own research: Before making any investment decisions, do your own research and consider the risks and rewards of each investment option.

It is important to remember that investing in the stock market carries risk and past performance does not guarantee future results.

Step #2: Setting Up Your Account

Once you complete step #1, you need to focus on setting up your account.

1. Choose what type of account is right for you. Below are only a few of the common accounts:

Individual – An individual stock account is a type of investment account that allows an individual to buy, sell, and hold individual stocks. The account is typically opened with a brokerage firm and provides the investor with the ability to manage their own portfolio of stocks. An individual stock account can be self-directed, meaning the investor is responsible for making their own investment decisions, or it can be managed by a financial advisor. The value of an individual stock account will fluctuate based on the performance of the individual stocks held within the account. This type of investment vehicle provides the investor with the ability to potentially realize higher returns, but also carries a higher level of risk compared to more diversified investments such as mutual funds or exchange-traded funds (ETFs).

Traditional IRA – A Traditional IRA (Individual Retirement Account) is a type of savings account designed to help individuals save for retirement. Contributions to a Traditional IRA are often tax-deductible, and the investment earnings grow on a tax-deferred basis, meaning taxes are only paid when the funds are withdrawn in retirement. The contribution limit for a Traditional IRA for the tax year 2023 is $6,500 for individuals under age 50 and $7,500 for individuals 50 and older. There are also income restrictions for deducting contributions to a Traditional IRA. Withdrawals from a Traditional IRA prior to age 59 1/2 may be subject to a 10% early withdrawal penalty, in addition to ordinary income taxes.

Roth IRA – A Roth IRA (Individual Retirement Account) is a type of savings account designed to help individuals save for retirement. Contributions to a Roth IRA are made with after-tax dollars, meaning they are not tax-deductible. However, investment earnings in a Roth IRA grow tax-free, and withdrawals in retirement are also tax-free. The contribution limit for a Roth IRA for the tax year 2023 is $6,500 for individuals under age 50 and $7,500 for individuals 50 and older. There are also income restrictions for making contributions to a Roth IRA. Withdrawals from a Roth IRA are generally tax-free and penalty-free, as long as the account has been open for at least five years and the individual is over 59 1/2 of age.

2. Set-up your personal information in your account settings. Make sure all your information is correct and accurate. You may receive a hard copy in the mail for your files at home.

3. Important: Make sure you set-up your beneficiaries.

4. Set-up your bank connection, so that you may transfer funds to your account.

5. Optional: You may set-up automatic transfer, so that you don’t have to manually transfer funds every time you want to add money into your brokerage account.

Step #3: Decide What Securities You Want To Invest In

1. Mutual Funds – A mutual fund is a type of investment vehicle that pools money from multiple investors to purchase securities, such as stocks, bonds, or other assets. Mutual funds are managed by professional money managers who use the pooled money to create a diversified portfolio of investments.

2. ETFs – An ETF (Exchange-Traded Fund) is a type of investment fund that is traded on stock exchanges, just like stocks. ETFs hold a collection of assets, such as stocks, bonds, commodities, or currencies, and provide investors with diversified exposure to different market sectors or specific industries.

3. Index Funds – An index fund is a type of mutual fund or exchange-traded fund (ETF) that seeks to replicate the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. The fund holds a collection of stocks, in the same proportion as the index it is trying to track.

4. Bonds – A bond is a type of debt security issued by companies, municipalities, and governments to raise capital. When you buy a bond, you essentially lending money to the issuer in exchange for periodic interest payments, known as coupon payments, and the return of the bond’s face value (principal) at maturity.

5. CDs – A CD (Certificate of Deposit) is a type of savings account that is offered by banks and credit unions. CDs are considered to be low-risk investments, as they are FDIC-insured and have fixed terms and fixed interest rates.

6. Stocks – Stocks, also known as equities, are securities that represent ownership in a publicly traded company. When you buy a stock, you are buying a small piece of the company and becoming a shareholder. As a shareholder, you have the right to vote on certain corporate matters and share in the company’s profits, through dividends or capital appreciation.

Step #4: Start Buying and Investing In Your Future

This is the most exciting part of investing because you’re in charge of what you want to buy and invest in. You may decide to go moderate to risky depending on your investment goals. My investment strategy is to only invest in companies I understand. These are a few things I consider before investing. I will be using Apple’s statistics for this:

1. Is the company undervalued or overvalued? To figure this our I look at Yahoo Finance and I look at the stocks statistics. I then look at the PEG Ratio (5 yr expected), if the number is above 1 then it’s overvalued, but if the number is below 1 then it’s undervalued or fairly priced.

PEG Ratio – is a company’s Price/Earnings ratio divided by its earnings growth rate over a period of time (typically the next 1-3 years).

2. How is the company’s financial health? To figure this out I look at the Levered Free Cash Flow which indicates if the company is making money or losing money. Levered Free Cash Flow is more comprehensive measure of a company’s cash generation because it includes all cash inflows and outflows.

3. Do I want to generate Dividends? If you want to earn passive income then dividend investing is for you. To determine that you would have to look at Yahoo Finance and check how much dividends are paid out and how frequently.

You also want to make sure the company is always increasing their dividends every year. To figure that out you will have to go to Historical Data > Change Time Period to Max > Change Show to Dividends Only > Then Click Apply. This should show you the following.

It’s Never Too Late To Start Investing!