Picking stocks is a lot like buying a car. When you buy a car, you can’t just pick the first one that has the right color, you need to know that. You want to check under the hood, or at least kick the tires. If you don’t know about cars, bring your brother or your dad or someone who does. Most importantly, you take your time. If you’re not sure about the mileage or exhaust noise, pass it by and wait for a better deal. It’s no different when you choose stocks.

The first thing you need before buying shares in a company is a stock trading account. For this, you need a runner. If this is your first time, I recommend using a discount broker. This type of broker will process your buy and sell orders, and little else. Where do you go to find a stockbroker? Test your bank. There may be other, less expensive options, but your bank is a place you feel comfortable with and know how it works. Chances are if you have an account there, they can help you start a stock trading account easily and cheaply. I trade stocks using online banking.

For your first purchase, you want to buy what you know. Look at 3 companies you like: companies you’ve bought things from or where you meet people. Take a newspaper and write these four things:

• Price– If the shares are $500 each, you might want to skip this one for now.
• Movement of the Year (YM)

– This is how much the share value grew last year, and a pretty good indication of what the company will try to overcome this year.

• Dividend Yield (DY)

It is a percentage of the value of each share that the company pays out to shareholders each year. Some stocks don’t pay dividends, but make up for it with more growth (if the company doesn’t pay shareholders, you can spend that money making the company more valuable).

• Price/Earnings (PE)

– This is simply the share price divided by how much the company earned in this fiscal year. This number can be misleading depending on the current phase of the fiscal year, but basically a low P/E ratio means that the company’s stock is valued correctly for the amount of money the company makes.

Either that or the stock is undervalued and could skyrocket at any time. If the ratio is high, it means the company has a lot of projected growth, but little actual profit so far. This was common during the “Internet bubble”, when companies had great prospects but had not yet made any money.

Once you have these, it’s time to look at some charts. Go to the company’s website and click on “Investor Relations.” Download everything and look at the charts of your stock price and dividend payments for the last year, 3 years, and 5 years. Now read the newspaper. Not the front cover, the boring back cover snippets about money. Most of these articles are pretty easy to read, and reading through them for a few weeks will give you a pretty good idea of ​​what’s going on in the world of high finance.

Choosing stocks is about more than knowing the company. It is about knowing what is happening in the world that will affect the company. Now is the time to decide on your goals and make a buying case. First, write down what you want from your investment. Do you want to accumulate capital in 10 years, or do you want to double your money in a year, but risk losing half of it? If you are the first, then you are a growth investor. Otherwise, you are a value investor. You might be somewhere in the middle, but since this is a first time purchase, it would be a good exercise to choose stocks according to a strict investment philosophy.

Now your case for buying: This is an argument for and against buying stocks. In it you need to write:

• What is happening in the company regarding new business, new directors, new companies, new debt, new acquisitions/sale of subsidiaries, etc.
• What is happening in the world that could affect the company’s ability to make money
• The worst thing you can imagine to happen. Think about the one thing that would cause your company’s stock to plummet more than anything else.
• All the pessimistic ideas you can think of why you shouldn’t buy these stocks.
• Why do you think now is a good time to buy shares of this company?

Lastly, before you buy stocks, ask people. Ask someone who works for the company or ask an investment adviser, even if you have to pay them. If there’s even one factor you haven’t considered, your entire stock trading experience could be very painful.

Remember, buying stocks is not gambling if you know the rules. Understand your risks and don’t take any you can’t afford. Avoid startups for a first investment: save riskier stocks for when you’re more confident.