Investment Basics 101

In order to invest you must first decide upon a particular type of investing. Once you do this, you can start teaching yourself more about your style.

Although each style incorporates different tactics and therefore requires a unique approach, most investment styles overlap when it comes to the basic elements.

To build a foundation, you will need to know the types of orders available.

Before we move on, you ought to know that stocks are the main instrument for investments. Each stock has a “ticker” symbol. For example, Apple’s stock ticker is “AAPL”. More importantly, stocks have a certain number of shares, and those shares are what you buy. Imagine you’re buying a tiny piece of the company. The typical amount used when buying shares is 100, and it’s called one “lot”. Of course, you don’t have to buy 100 shares, you can buy odd numbers of shares. Any number not rounded to 100 is considered an “odd lot”. This means that if I buy 16 shares, it’s an odd “lot” of shares.

Types of Orders:

There are two basic orders you can place: Buy and Sell. Each have variations however, which can make buying or selling a stock seem complicated if you don’t know what you’re getting into.

To start, the simplest order is a Market Order. This means when you place the order, you will get filled at the most immediately available price. If you buy at the market, you’re purchasing a specific amount of shares immediately at the current price.

The other common order type is called a Limit Order. This is when you set a specific price to buy or sell at. To illustrate, if you want to buy a stock at $20, placing a buy limit order would allow you to buy the stock only until the price hits $20.01. Once the stock price buys/sells at $20.01 or higher, your order would not get filled. If you want to sell a stock at $20 using a sell limit order, the order would get filled all the way up until the price hits $19.99. At $19.99 or lower, your order would not get filled and the transaction would not take place. Basically, a limit order gives you some degree of control over the price you buy or sell a security at.

There are other types of buy and sell orders, but they are more complicated and will be explained at a later point in time.