Can somebody clarify stock trading for me?

[xBa380]

Hello everybody,

I have been toying with the idea and investing in stocks to play around with. I was mainly looking at Scotts Trade which looks to be solid, with some of the best fees.

However, I have a few questions to clarify all this. Trying to learn before I do anything.

Right now, I am currently "playing" with fake money... I "invested" $2,000 and bought into two companies, about 40 shares a piece... Two that I thought looked pretty solid short term, long term and fit the current market well.

If I were to put this $2000 into ScottsTrade for example for real, they have a $7 trade fee... I pay $7 to buy the stock AND $7 when I sell it, correct? Totalling $14 total to buy/sell? Or just $7?

If I buy 40 shares of something at $20... $800 "invested" into a company... I pay the trade fee and whatnot... If I sell it two weeks later at $25/share, my current investment is now worth $1000... Minus the $7/$14 fees, I "NET" around $186 or $193 depending on the (7/14 fee thing), correct? Do I pay any other fees by doing it myself online?

What other stuff do I need to look out for?

Appreciate the info.. Sorry if this seems scattered and confusing.. I am just trying to learn the ropes here!

-Steve

 

[Trajan]

You pay $7 per trade. Buy stock A, spend $7. Sell stock A, spend another $7.

 

[bepperb]

"I pay $7 to buy the stock AND $7 when I sell it, correct?"

Yes.

"If I buy 40 shares of something at $20... $800 "invested" into a company... I pay the trade fee and whatnot... If I sell it two weeks later at $25/share, my current investment is now worth $1000... Minus the $7/$14 fees, I "NET" around $186 or $193 depending on the (7/14 fee thing), correct? Do I pay any other fees by doing it myself online? "

Yes, no.

"What other stuff do I need to look out for? "

TAXES on short term capital gains.

Well, what you are doing is pure speculation. Buying one or two stocks is almost always speculation. Personally, what I would tell you to do is find a no cost mutual fund or exchange traded fund. I get mine through Schwab, but no doubt ScottTrade has something similar. I don't pay to buy, I don't pay to sell if it's after 30 days. I buy the sp500, a bucket of 500 stocks, instead of two individuals. The only time I pay is .2% per year fund administrative costs. But, what you are doing is a good idea because it gets you into the game, which is one you should understand.

Try investopedia. Understand dividends. Yahoo Finance.

14 bucks on 1000 isn't too bad if it's something you hold for a year or two, get paid a dividend and hope for capital (stock price) appreciation. 1.4% is about the norm for a mutual fund anyway.

 

[wallyuwl]

Originally Posted By: xBa380
Hello everybody,

I have been toying with the idea and investing in stocks to play around with. I was mainly looking at Scotts Trade which looks to be solid, with some of the best fees.

However, I have a few questions to clarify all this. Trying to learn before I do anything.

Right now, I am currently "playing" with fake money... I "invested" $2,000 and bought into two companies, about 40 shares a piece... Two that I thought looked pretty solid short term, long term and fit the current market well.

If I were to put this $2000 into ScottsTrade for example for real, they have a $7 trade fee... I pay $7 to buy the stock AND $7 when I sell it, correct? Totalling $14 total to buy/sell? Or just $7?

If I buy 40 shares of something at $20... $800 "invested" into a company... I pay the trade fee and whatnot... If I sell it two weeks later at $25/share, my current investment is now worth $1000... Minus the $7/$14 fees, I "NET" around $186 or $193 depending on the (7/14 fee thing), correct? Do I pay any other fees by doing it myself online?

What other stuff do I need to look out for?

Appreciate the info.. Sorry if this seems scattered and confusing.. I am just trying to learn the ropes here!

-Steve


You have a decent grasp of the process. The only other fees to look out for are "inactivity fees" (eTrade for example charges you $40 each quarter if you don't make at least one trade OR have a combined balance of at least $2000 of stock "worth" and cash in your investment account).

The trick, of course, is what stocks to buy and when to sell...

 

[xBa380]

I was looking into funds as well (such as S&P) and whatnot, just was looking clarify how they all work in general, so thank you for confirming it for me.

For right now, I plan to "pretend" until I get a better grasp of it all and feel confident enough in the real deal. Any additional information would be great if anybody has.

Thanks again everybody!

 

[The_Jeff]

If you do it through an IRA the taxes are way less. I figure "they" are going to let me cash out of my IRA before retirement for a future economic stimulus idea, so I'm not to worried about locking the money up for 40 years.

Also unless you're playing with D-grade penny stocks you need to buy an expensive pile of shares to get the best deal, probably 100 shares if valued around $30, 2000 shares if valued at $1, etc.

It's fun, but vain, to think you can pick a single company and have it perform more reliably than the market. I'd have liked to have bought Ford at $2 too.

My IRA is all in a Vanguard S&P index fund.

 

[PandaBear]

Fund is a bundle of stocks in a "portfolio" managed by people or a certain guideline (index). The benefit of a fund is that in theory it is less volatile because of diversification (put your eggs in many baskets) or the intelligence and experience of a manager that will in theory makes you more money (as they claim), the disadvantage is they charge a fee (a fraction of a percent to less than 2 percent) to "manage" it.

IRA and 401k has a stricter guideline as to what they can invest in and what they cannot, because risk is proportional to reward and the last thing government want is your retirement took too much risk and vanish, and they have to bail you out at the old age.

 

[L_Sludger]

Looks like your question got answered. Avoid selling a security and then buying it (or a substantially similar one) again within thirty days as you will not be able to deduct the short term capital loss on your taxes due to the IRS wash sale rule.

 

[crinkles]

unless your money is purely play money, build a core of $50k in mutual funds first.

 

[xBa380]

Thanks for all the help everybody...

Mainly, just looking to understand it all for now. I am opening my Roth IRA in the next few weeks here (Just turned 22) so want to build a very nice retirement by starting early and trying to max it out to invest.

If I did any stock trading, it would be "play" money and nothing serious. But for now, the Roth is my big concern and plan to invest it in a nice diversified portfolio through Vanguard. As I get more invested, I will maybe try to get more aggressive with it. But for now, I am going for slow build