Do you want to buy individual stocks but don’t want to pay $6-$10 per transaction, or do you only want to buy one or a few shares at a time? This ability is now a reality through the Free, yes FREE Stock Trading App called Robinhood (www.robinhood.com).
You may be thinking, “what’s the catch, this has to have fees/costs associated with it, is it really commission free? How does Robinhood do this and make money?” Well, Robinhood accrues interest from customers’ un-invested cash balances and does not charge its customers any fee at all. With Robinhood, there is no longer a reason to pay big brokerage companies fees for every transaction.
Now that you are aware of Robinhood it is time to start investing. If you are new to investing I recommend having at least a consolidated amount of $10,000 in index funds and/or mutual funds through your retirement accounts and Acorns account, however the opportunity to start small is now available. When you start investing in individual stocks it is important to avoid investing in companies based on speculation but rather decide whether to invest in a company if you believe that company will be around 10 years from now. Take a lesson from Warren Buffet, one of the greatest investors in the world. When starting out “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”. One of the most important rules I have ever learned was from Warren Buffet when he discussed his investing strategy. He said “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”. This means do not sell when everyone else is selling a stock but rather try to decide whether it is an opportunity to buy and vice versa when a stock rallies high from people buying the stock, determine whether it’s an opportunity to sell the stock for some profit. From the words of Jim Cramer, “Nobody ever got hurt taking a profit”.
If you are nervous and not sure what companies to invest in, start with blue chip stocks. According to Investopedia.com, “Blue chip stocks are nationally recognized, well-established and financially sound companies. Blue chips generally sell high-quality, widely accepted products and services. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps contribute to their long record of stable and reliable growth”. A couple of blue chips to mention are companies like Johnson and Johnson, General Electric, Boeing, AT&T, Verizon, and Bank of America. To see a full list of blue chip stocks, check out a website like http://www.bluechiplist.com/blue-chip-stocks/us-blue-chips/. Remember before investing in any one stock make sure you do your homework and read up on the company’s previous quarter performance to get an idea of where the company is heading. Please understand that when investing in individual stocks you are taking on more risk as opposed to index funds and you are less likely to stay diversified compared to index funds.
Lastly, all investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk it does not assure a profit, or protect against loss, in a down market. There is always the potential of losing money when you invest in securities, or other financial products. You should always consider your investment objectives and risks carefully before investing.
Summary:
- Interested in buying individual stocks without paying any commission fees? Download the Robinhood mobile application
- Buy stocks of companies you like and are familiar with. Companies that you expect to be around for many years. If you aren’t sure what to invest in, start with blue chips as they are usually companies that produce solid consistent returns with a nice dividend.
- Do not buy stock on speculation, if it is too good to be true, it probably is. Avoid penny stocks that your friend told you about. Penny stocks are very risky compared to blue chip stocks.
- Be greedy when others are fearful and be fearful when others are greedy.
- Nobody ever got hurt taking a profit!