How to buy your first stock in 5 days

Kickstarting your portfolio in 3...2...1...

Investing in the stock market can be an overwhelming task, especially if you’ve never done it before. At first glance, looking at the numbers scrolling through the screen while you watch MSNBC and listening to the analysts speak, nothing makes sense, it all sounds and looks like gibberish. You can do it, though! There are plenty of resources out there for you, and I’m here to help.

Let’s consider Apple: the darling tech stock that we all know and love (or love to hate). It is a hugely popular brand globally. Its market capitalization (total value company’s shares of stock) is over $1 trillion, which goes to show how popular it is from a product usage standpoint. When its sales grow, its stock price rises, when its sales fall or the company misses expectations, its stock price falls. When it has delivery hiccups, a similar pattern is reflected in its stock price. So sometimes our knowledge and affection for the brands we love or interact with daily can help or affect our investment decisions.

At the time I wrote this article, Warren Buffet owned about 50 million shares of Apple stock. For the purposes of context, Apple is currently trading at $135.50 a share. Do the math, 'that's billions of dollars worth. The kicker here is how much money he collects in dividends every quarter from Apple. Apple pays about 80 cents a share in dividends every quarter, so 'that's $3.20 a share yearly. With compounded interest and all, Mr. Buffet gets paid millions every quarter for owning those 50 million shares of Apple. Well played, Warren! That is why he is considered the Oracle and one of the richest men in the world. Back to you: if you owned 100 shares of Apple stock today that you bought five years ago… 😀

Over the last week or so, something very interesting has happened in the stock market that got everyone's attention. A battle started in Reddit chat rooms between Mainstreet vs wall street regarding Gamestop, a retail store chain that sells and trades video games and equipment. The long and short of it: the stock was driven up 1500% this year alone. In a few days, retail investors (i.e. everyday people) were in the driving seat, pushing the stock up against the institutional titans of Wall Street Who had essentially made a bet on the stock falling (this is called a “short”) . A lot of everyday people got rich overnight and the institutional hedge funds lost billions. One of them, Melvin Capital, shorted the stock and lost 53% of its investment. This was billions of dollars.

As a result, everyone is paying attention and wants to get in on the gold rush. As someone who has followed the trends and actively invests, even I was blown away by this. However, investing in the stock market is not my preferred vehicle to wealth building, as my focus has shifted to real estate investing. However, I still do hold a small long-term portfolio, have day traded in the past and keep up with the trends. So I do feel it is well within my reach to speak on the topic and help where I can for those insistent on getting started.

Fundamentally, it's quite a simple process when broken down, as most of the companies we invest in are part of our everyday lives and the market somewhat tends to mimic or pattern their real-life expectations and contributions to society.

In this article, I am going to do my best to simplify the process of buying your first stock. This process then can be replicated as you aim to build a successful investment portfolio for your future. Follow these steps, and you should be on your way to building your portfolio in less than a week.

Day 1 : Open a brokerage account

This is the platform from which you will be making and managing your trades and investment. There are tons of brokerages out there for you to choose from, so do your research and make the best decision based on your needs. Convenience (ease of use), education, fees are a few things to consider. A few that I can recommend are Robinhood, TD Ameritrade, and ETrade. I've used all three. For the beginner just looking to dabble and get their feet wet, I'd recommend Robinhood. It's easy to use and navigate, and there are no trading fees, meaning you don't get charged to buy or sell a share of stock. If you have more experience and are ready to immerse yourself more fully and move at a slighter faster pace, use either TD Ameritrade or Etrade. Both have a stock trade fee of $6.95, and ETrade requires a $500 minimum deposit. Once you select one, go ahead, apply and follow the necessary steps to get approved and set up.


Day 2: Fund your account

Now that you've selected your brokerage account and successfully opened it, it's time to fund your account. Link your bank account to your brokerage account. This account is your designated funding account for your brokerage account. As a beginner, start small; between $500-$1000.If you chose eTrade you would need at least the $500 minimum to invest. If you have more money to invest (OK, ballers!) or someone with very little patience, feel free to go big at your discretion but proceed with caution.

Day 3: Pick a stock top 10

Once your account is funded, it's time to figure out which stock(s) to buy. A simple way to get started on that is to make a list of 5-10 of your favorite brands. This may require a little research, but for me, I make a list of my five favorite brands that impact my life almost every day, one way or another. They are Nike, Apple, Amazon, Disney, and Netflix. On that list, some of them might be listed on the stock exchange (DOW Jones Industrial, NASDAQ, or the S&P 500), some might not. Eliminate those that are not listed as they are not publicly traded companies and cannot be bought/sold in the stock exchange or open to investment from the general public.

Day 4: Research your stock

Now you have a list of five dependable publicly traded companies. It’s a good idea to learn, now, how to follow these stocks (and research new ones) on websites like Google Finance. Your brokerage account should have these details as well, but get used to double-checking your numbers. To simplify things let's use the same list as the one I compiled earlier. It’s now time to do your research on each one to figure out which one makes the most sense and is affordable to be your first stock to purchase based on your initial investment which is no more than $1,000. Right off the bat, we can eliminate Amazon. The share price for one amazon stock currently trades at $3,318. Bummer! Hopefully, we can work our way up to that. When researching your list of companies, there are a few indicators to look for. Yes, there is a lot of technical and historical data that can overwhelm you, but let's keep it simple. Let's choose Nike. One share of Nike stock currently trades at $140, which is well within our reach.

A few other things to help you decide if the stock you are picking is right for you is the following:

1. 1. Always buy upward trending stocks: you want to make sure over a 3-5 year period that stock is moving in the upward direction.
2. 2. Always buy stocks with strong earnings; this is the profit divided by the number of common stock shares it has outstanding or available to the public.
3. 3. Using your research tool, always check the 52-week range of the stock and see if it pays dividends
4. 4. Check out the Income Statement
5. 5. Check out the last three years. Your stock needs to have sequential growth in its top-line revenue
6. 6. Check out quarterly numbers: Should also be growing in a sequential manner

If your stock meets all if not most of these criteria, then it’s a good pick.

Day 5: Buy your first stock

Now that we have done our research and have put a reasonable amount of time into the decision-making process, we arrive at my favorite thing to do. Execute, execute, execute! It's time to purchase our first share of a publicly-traded company. Be sure to follow the prompts and lessons offered within our brokerage account on how to purchase a share of stock. Once successfully purchased, plan on monitoring your stock from time to time and watch it grow. Since we are in this for the long haul, don't panic when things don't always go your way (i.e. red days) as these are regular movements of the market daily. Stick with your plan and as a good rule of thumb that I follow, every time your stock increases by $5, increase your share(s). If your stock loses more than 5-7% and bottoms out, buy more shares and climb back up using your $5 increments rule. Over the years, you will accumulate a lot of Nike shares, that not only will be worth more than the initial $135/share but will also pay dividends (a sum of money paid quarterly by a company to its shareholders out of its profits) for being a shareholder. It can't get any better than that, and that is one of the ways wealth is built. Good luck and don't go crazy!