Beginners Guide to Buying Stocks

What are Stocks?

Stocks, also known as equities or shares, represent ownership in a publicly traded company. When you buy a stock, you’re buying a small piece of the company and become a shareholder. As a shareholder, you have the potential to earn money through dividends, which are payments made by company to its shareholders, or through capital appreciation, which is the increase in value of stock over time. The value of stock is determined by supply and demand in stock market and can fluctuate based on a variety of factors such as the company’s financial performance, industry trends, and overall market conditions.

What is Buying and Selling of Stocks?

Buying and selling of stocks is a way for individuals and institutions to invest in companies and share in their growth or decline. Buying a stock makes you a shareholder of that company, creating your chances to earn through their sales. Conversely, when you sell a stock, you’re selling your ownership stake in that company. To buy or sell stocks, you typically need to open brokerage account with a firm that facilitates stock trades.

Which Time of Day to Buy Stocks?

Some traders and investors believe that best time to buy stocks is early in the trading day around 9:30am to 10:30am. EST, when market is less volatile and there’s less competition for shares. During early hours of trading day, there may be fewer traders and investors actively buying and selling stocks, which can result in less volatility in stock prices. Additionally, at the open of market, participants have the most recent and up to date information which can lead to more informed decisions. This is also the time when market is most transparent, as most recent information and news have not yet been fully digested by the market participants.

Some believe best time to buy stocks is later in the day between 11:30am and 2pm. EST, when the market has had time to settle and prices may be more favorable. As the trading day progresses, market participants have had time to react to news and events, and prices may have settled into a more stable pattern. More information about company and overall market conditions may become available, which can help traders and investors make better decisions.

Others believe that it’s better to buy stocks at the end of day around 3pm to 4pm. EST, when market has closed and volume has decreased, this way it’s possible to get a better price. There may also be less demand for shares. This can result in more stable prices, and also better chance of getting better price on a stock. As market closes, all participants have the most information, which can lead to more informed decisions. It’s also important to note that at the end of day, market participants have had the opportunity to react to all day’s news, events, and economic releases, and thus, prices may reflect more accurately the company’s true value.

Which Day of Week to Buy Stocks?

When it comes to the best day of week to buy stocks, some investors believe that it’s the beginning of week, when market is less volatile and there’s less competition for shares. Studies have shown that, stock market tends to perform better on Mondays than on other days of week. This could be due to the fact that investors and traders have had time to process any news that came out over the weekend, and can make more informed decisions on Monday. Another theory is that investors and traders who have been away from the market over the weekend return to work on Monday with fresh perspectives and new information. This can lead to increased buying activity, pushing stock prices higher. Additionally, any positive news or developments that occurred over the weekend may not be fully reflected in stock prices until Monday, providing an opportunity to buy at a lower price.

Other investors believe that its best to buy stocks at the end of week, when market has had time to settle and prices may be more favorable. As the week progresses, market participants have had time to react to news and events, and prices may have settled into more stable pattern. The participants have also had the opportunity to digest the week’s events and news, and thus, prices may reflect more accurately the company’s true value. Another reason could be that some investors or traders may be closing their positions before weekend, which can lead to lower prices, providing an opportunity to buy at a lower price.

Overall, Seasoned investors commonly consider Monday to be optimal day of the week for purchasing and disposing of stocks due to information and anticipation gathered from traders over the weekend.

Which Strategy to Acquire?

Experts suggest going for the long-term buy-and-hold strategy which is an investment approach that involves purchasing stocks with intention of holding onto them for an extended period of time, usually several years or more. The idea behind this strategy is that over long-term, stock prices will generally rise as the underlying companies grow and become more profitable. By holding onto stocks for an extended period of time, investors can potentially earn significant returns through capital appreciation and dividends. The strategy also assumes that market will return to its historical mean, and over time it will recover from any short-term volatility. This strategy is often used by investors who have a long-term investment horizon and a high risk tolerance, and who are willing to ride out short-term market fluctuations.

Conclusion

This may not be a one-size-fits-all situation. It all comes down to experience, the more time you spend in market, the more you’ll understand its trends. But for beginners it is recommended to buy stocks at the beginning of the week, early in the day and follow the long-term buy-and-hold strategy.