Buying and selling stock is easy! Except when you factor in all the other fancy options you can use such as limit orders, all or none, or good for the day type of options. Let me explain from a bird’s eye view on what all these are and also on some of the possible tax implications for short term and long term stock trades.
How’s it going everybody this is beat the bush today i’m gonna cover something very basic which is how to buy and sell stock some of you might think this is a little bit too basic but i will cover a little bit of tips and tricks along the way as well now how do you buy a stock basically you get a brokerage account i suggest if you’re just starting out get a brokerage
Account look for something that has free trades for example you can use the robin hood app i’ll have a link down in the video description below you can use e trade or you can use bank of america’s thing which is called merrill edge i personally use that one because they give free trades if you have enough money in there they have other ones like scottrade charles
Schwab td ameritrade all of those you can do trading on those now when you get down to it all of these brokerage firms will allow you to do certain things such as buy and sell a stock normally within these methods you can also do something fancy like buy within the day buy within 60 days you can have it executed immediately or cancel the order completely so if it
Does not fulfill it right away it’s gonna completely cancel it and this order will remain unfulfilled to begin with you have to understand what the stock market is for any particular particular symbol that you’re looking to trade in i’m gonna use vo o as an example which is a snp etf phone now if you want to buy something like this you just go on the stock website
You just say buy it’s gonna ask you how many shares that you want is gonna ask you what the ticker symbol is for the example i’m using it’s vo o netflix is nfl x tesla s tsla when you do enough trading you’re gonna be able to recognize any company and know what the ticker symbol is for any particular company when you buy a stock it’s gonna ask you do you want to
Buy our market do you want to buy our market close or do you want a limit order market is basically whatever price that it’s currently at you want to buy at that particular price so sometimes when you submit the order the market price could fluctuate up and down and sometimes the price of that stock might vary very aggressively so you’re not really gonna know
Exactly which price that you’re gonna buy if you buy at a market order generally i feel unless that particular stock it’s superduper liquid there’s a lot of participants and you’re not gonna look at seeing any kind of spike in prices all of a sudden then yes you can buy a market order relatively safely the danger here usually with barney market orders is if you
Buy into let’s say you think it’s gonna be $100 right and right when you submit the order the price of that stock suddenly somehow it jumped there’s like a little spike it goes to one hundred ten ten dollars for like maybe five seconds or something and you could have a possibility of buying it right at $110 and then all of a sudden it comes back down and then
When you go look at the order your order is fulfilled at $110 at but then the sub price is still 100 so you lose out greatly in that case for no particular gains so a lot of people would actually recommend to put in a limit order even if you can put in a market order limit order work something like this when you have a market let’s say the price of the stock is
$100 someone it’s gonna want to sell the price of that stock they’re gonna be holding onto the stock and maybe they don’t want to sell a hundred so they put in a limit order to sell at let’s say a hundred and one dollars since the market price is at 100 that order is not gonna be fulfilled yet so it’s just gonna be sitting there when you have a whole bunch of
Market participants it’s gonna have a lot of pending orders and so when the market price actually hits 101 then those market orders is gonna be fulfilled so when you do limit orders i know it’s a little bit difficult to think about okay should you put a limit order above the price of the current market price or below so here’s the way to think about it when you
Buy something obviously you want to buy it for less than the current market price right so when it’s at $100 and you go okay i want to put in a limit order at 99 then when you submit the order it’s obviously lower than what it currently is therefore your order is not gonna get fulfilled if you’re willing to wait awhile and if you think that if the price is gonna
Go down to $99 then yes you can submit that order wait a while maybe it’ll hit that point and then your order is gonna get fulfilled there’s another trick here is if you want actually a market order and you want it to be fulfilled relatively quickly you want to look at the market price and just kind of eyeball how much is it fluctuating up and down and then just
Go put in a market limit order of little bit above the market price so let’s say it’s $100 and it fluctuates plus minus 20 cents or something you put in a market buy limit order and you set the limit price at $100 and let’s say 30 cents 40 cents 50 cents or something a little bit above what the current price is when you submit that order the system is gonna go oh
Yeah you’re willing to pay up to this price okay so let’s fulfill it and if the market price ever moves above that we’re gonna stop fulfilling it this strategy is really great for when you want to keep yourself from buying any of the market order stock at $110 so you put like a cap on it and this is a strategy a lot of people employ if you’re a beginner it might
Get confusing because you can just go oh yeah i don’t know what i’m doing let me just by market market all the time so using this limit order is a great way to prevent yourself from you know having these sudden spikes and suddenly pay more than you should be selling on the other hand it’s roughly the same thing you can also sell at the market price you can also
Sell at a limit order price when you sell you want to sell it for as much money as possible because this maximizes your profits right so if the market price is $100 you want to sell it for higher than that right so you want to go okay limit order of sell 101 dollars with that order is sort of out of the money because it’s not the market price you have to wait until
The price suddenly increases to 101 dollars before it would be fulfilled however if you’re just thinking of oh you want to do a market order but you want to be safe about it then you place a sell market order at let’s say 99 dollars and 50 cents this will guarantee so that any sudden price drops let’s say it suddenly goes to $80 it’s not gonna fulfill it then you
Won’t end up selling at $80 because that’s not gonna match the current market price it’s just these little blips little jumps that you’re trying to avoid on top of all of this sometimes you might have the option to sell all the shares at a certain price so it’s called all-or-none for e trade for example they require you to sell more than 300 shares to do all or
None option this is great because sometimes i have sold certain things at the market order and as you’re selling it the price would suddenly drop because it’s fulfilling all those orders all those pending orders at the market price and as you’re selling more and more of it sometimes it moves the price of the stock itself if it happens to be a low volume type of
Stock so when you end up with let’s say you’re selling 1,000 shares of a cheap stock or something and the price keeps on moving so by the time you get your taxes the prices on those things it’s gonna be all over the place and sometimes this makes it really difficult to do your taxes so a lot of times it’s better to just try to set a limit price do all or none just
To make sure all of it gets done at the same price so that your taxes on that particular asset it’s not gonna be split off into a lot of little different pieces it makes things a lot more difficult for me i would personally pay another penny per share so that would cost me another ten dollars just so that all of that stays in one big bundle instead of you know
Getting all split up in two different prices one additional thing that you really should consider as a beginner investor when you buy and sell individual stock is essentially more risky so you really need to know what you’re doing here generally i think for individual investors is better that you buy an smp index or something just buy indexes because when you try
To do individual stock you’re essentially saying that you can do better than their overall market you that you can do better than fund managers or you can research a lot so you don’t really know if you’re going to be good at trading you know at the very beginning i know a lot of people want to try their hand at it i myself did as well and you know i continued to
Buy and sell individual stock sometimes so just know about this before you go around buying individual stock you know you know playing a trader basically you also want to consider your short-term capital gains and long-term capital gains taxes people generally have a good idea that okay long-term capital gains is roughly 10% less which is sort of true short-term
Capital gains is essentially taxed at your current tax bracket level so whatever income tax bracket that you are at you know 25 percent 28 percent 35 percent or whatever when you have short term gains so when you buy and sell within one year those gains would be considered a short term gain short term gains is taxed your income tax bracket level so if you’re at
A 25 percent tax bracket level let’s say you bought a stock at $1,000 and somehow it increased to $2,000 somehow it came up 100 percent and then you sold it within that year because you thought oh yeah it got high enough i’m gonna sell and take some profits so you took $1,000 with a profit and this $1,000 will have 25% taken off of it if you happen to be at the
25 percent tax bracket level so this means $250 goes to the government right away if you are right at that one-year mark and you wait one extra day then it’s gonna be considered a long-term gain if you are at the 25 to 28 percent tax bracket level which many people are suddenly this long-term gain is not gonna be taxed at 25 28 percent it’s gonna be taxed at 15
Percent so this is like right off about ten thirteen percent off of your taxes so instead of paying $250 for your taxes you’re gonna pay $150 instead if you had one more day left you might go okay you know maybe one day it’s not so bad you just wait one more day and then you don’t have to pay another $100 in taxes so keeping this in mind will help you a bit in
Terms of minimizing the amount of taxes that you have to pay especially when you were near that one-year mark so thanks for watching everybody i hope this was helpful in you new traders out there if you’re interested in supporting this channel i have a new amazon store link if you go on my amazon page i’ll leave that link over here amazon.com ford slash shop ford
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Transcribed from video
Financial Education: Buy and Sell Stocks By BeatTheBush
