Investing

I am coming up on my first full year of investing in stocks. I figured I would share the process with you in hopes of giving a few tips to anyone who is interested.

In October of ‘05, I opened up an account at BuyandHold.com, an online broker that is a bit different than the rest. BuyandHold buys stocks using windows of time and amounts of cash instead of by the share for a flat fee per month of $7. Included in that $7 is two “free” trades. BuyandHold hooks up to your bank account and you can start transferring money in to your account over the internet.

When I would buy stocks using BuyandHold, I would place an order for AAPL (Apple) using $500 and select a window of time of either 10:30, 12:00, or 3:00. BuyandHold then collects all orders in it’s system for the specified time and buys the stock together, sort of in one big basket. BuyandHold then credits me with 8.42 shares, the $500 divided by the price of each share. The only bad thing about this is that I am at the mercy of whatever the stock price is at that time. But that’s BuyandHold’s strategy – to hold the stock for a long time, thus the price you buy into doesn’t matter that much.

A few other websites I would use were Clearstation.com, Investopedia.com, and various message boards. I started to learn a lot on how to predict when is the best time to buy into a stock. As I saved cash into the account, I realized that it does matter what price I bought the stock. For example, one stock I was following was a company called Vaalco Energy (EGY). In January of ‘06, I started to notice a trend in the trading. About lunch time, the specialist (without a big explanation, the guy in the trading pit who controls the trading of the stock) would knock the price down a good .30 cents of so and then bring it back up – which is a big swing for a stock that was trading in the 6’s at the time. Since BuyandHold can also do realtime market trades for $15, I tried it. I waited till the price went down at lunch time, bought in, and in turn made an extra $150 or so, for the price of EGY came right back up. So this got me interested in finding another broker.

After much searching and research, I found Firstrade.com. With Firstrade.com, there are no monthly fees or cancelation fees. It has low commissions – only $7 a trade – and I can also invest in Mutual Funds, Fixed Income Funds, Options, etc…I could create many accounts, such as a Roth IRA account, in addition to my regular trading account. Firstrade.com hooks up to my bank account and I can transfer money back and forth. Plus, any cash sitting in the account collects interest of a little over 2%. It was awarded the best deal by Smart Money Magazine and all funds in your account are completely insured. I now place all my trades using limits, where the stock has to hit a certain price and then it triggers my buy.

I’ve been with Firstrade for almost six months now and have been completely happy. And for anyone interested in setting up their own account, let me know and I can pass on a deal that will give you a few free trades. Investing in stocks on your own can be intimidating at first, but very rewarding with a little due diligence. I suggest using the simulator over at Investopedia.com. By doing this, it will give you a little practice with play money and it’s very accurate as to what it’s like buying stocks. Once you get that down, do it at Firstrade using your own money.

If your still not comfortable buying stocks, then Firstrade offers a ton of mutual funds. The point is, start saving money and let that money go to work for you. I wish I would have done this years ago. Hope this all helps if any of you were interested in investing, yet had no idea of where to go.