When you think of trading stocks, you probably have in image in your mind of men (yes, men) in weird jackets on the trading floor of the stock exchange yelling things and perhaps holding their heads in their hands. Or you might envision a line of desks and computers, with people on the phone, shouting at each other and looking frantic.
The media’s portrayal of stock market trading makes it look intimidating and chaotic. The real picture for do-it-yourself investors looks more like the ones you'll see on the websites of financial institutions: a woman sits at her kitchen table with her laptop open drinking coffee, a young person sits on a park bench with their phone in hand, a grey-haired couple gaze at their computer screens with affection. As cheesy as these stock photos are, they are actually pretty accurate portrayals of what stock trading looks like for the individual investor.
Take "trading" off your list of excuses
If you are ready to become a DIY investor and take control of what you own and lower your fees, there are a few things you need to learn: how to allocate your money between asset classes (cash, bonds, stocks), which investments to buy, which accounts to use, and how to place trades. Of all of these items, trading is the easiest to learn and you can quickly knock it off your list of excuses for why you don’t want to DIY invest.
Three things you need to know about trading
There are really just three things you need to know about placing your own trades online: what a ticker symbol is, how to figure out how many shares or units you want to buy, and the type of order you need.
A ticker symbol is like a product code for investments and you need it to make sure you are buying the right thing. The quantity can be determined using simple math: all you need is the price of the stock or unit and the total amount you want to invest. Order types come in at least three forms: market order, limit order and stop order. You can ignore the last two - the vast majority of us just need market orders.
With these three pieces of information in hand, placing an order is super simple. If you are comfortable ordering groceries online, booking accommodation through Air BnB, and paying your bills using online banking, then you're probably ready to trade online too.
I can almost guarantee that you'll be placing trades while eating your breakfast after just a few orders. Don't let the media's portrayal of the chaotic trading floor hold you back from becoming a DIY investor - it's really not complicated.
Take care of yourself (and your money),
Anita Bruinsma, CFA
Clarity Personal Finance
