From Dream to Reality

Summary

• How to Buy your First Share

  • Starting Information

  • Funding Your Account

  • Buying Your First Share

• Cash Movements

Welcome, fellow rookie investors!

Last week, we talked about Brokers, what they are, how they work, and why we need them. This week, we're taking a big step forward by turning our dreams of owning stocks into a reality by buying our first share.

If you haven't had a chance to read the previous blog yet, I recommend doing so before continuing here. Understanding what a broker is will provide an easier understanding of the concepts discussed in this post.

How to Buy your First Share

Starting Information

To start things off, we'll use the Trading212 platform as our broker and for our first share purchase. With Trading212's fractional shares feature, we can invest as little as 1€ but for the sake of this example, we will be starting with a budget of 100€. Our aim is to invest this quantity in the S&P 500 ETF, due to its diversification and widespread popularity in the stock market.

Funding Your Account

01.- To begin, let's open the Trading212 app. Once we're in, we'll navigate to the icon with three horizontal bars located at the bottom of the screen.

02.- Once there, we'll find various options, settings, and information. However, what we're looking for is the big blue button labeled "Deposit funds."

03.- This will lead us to a screen showing the various options provided by Trading212 to fund our account. While using Apple Pay or Google Pay is the simplest an quickest method, it's important to note that a 0.7% fee is charged after depositing €2,000 or equivalent in other currencies. Therefore, we'll opt for a regular bank transfer, which may take up to two business days but is entirely free of charge.

04.- After selecting Bank transfer, we'll need to enter the IBAN of the bank we're using to fund our account. Lastly, we will press on Confirm.

05.- After confirming, we'll be taken to the previous screen, where we'll notice that our account with the IBAN has been added. Now, we can simply tap on it again, which will take us to the final step.

06.- In this last step, you'll notice on the top right of the screen various currency options available for funding your account. The numbers next to each currency indicate the interest rates earned on uninvested cash, but we'll dive deeper into this in a future blog post. As you scroll down, you'll find all the necessary information to provide your bank for the transaction.

After having completed the previous steps, all that's left is to wait for the money to be deposited into our Trading212 account. Then, we can move forward with the process of purchasing our first share.

Buying Your First Share

01.- When we launch the Trading212 app, the first thing we'll notice is the total amount we've just deposited at the top of the screen. We'll also find options to Create a Pie and Explore Stocks. However, to begin our purchase process, we'll navigate to the bottom of the screen and tap on the magnifying glass icon. This will enable us to search for the specific stock we're interested in buying.

02.- Here, we'll head over to the top of the screen again, where we'll find the search bar. We'll type in "VUSA", which serves as the ticker (unique identifying number) for the ETF.

03.- We will see that 3 results appear. However, if we look closely, we'll notice that they trade on different exchanges: London, Amsterdam, and Switzerland. As a result, each will trade in its respective currency (euro, pound, and Swiss franc). You're free to select the one that suits you best, but personally, I prefer to invest in euros or dollars, so I'll opt for the one trading on the Amsterdam Stock Exchange.

04.- Upon selecting one of the results, we'll be directed to a screen containing different details about the specific stock. This screen also displays the opening and closing hours of the exchange where the stock trades. We can access this information by tapping the small market button, which will be labeled Pre-Market, Market Open & After Hours. But to purchase a share, we simply need to tap the big blue button labeled "Buy."

05.- Tapping the blue "Buy" button will lead us to the purchase screen, where we'll find the current price per share. Here, we'll also be presented with four different purchasing options: market, limit, stop, and stop limit.

• Market: Allows you to buy the stock at the current market price. It's the simplest and quickest way to make a purchase, but the price may fluctuate slightly between the time you place the order and when it's executed.

• Limit: You can set a specific price at which you are willing to buy the stock. The order will only be executed if the stock reaches or surpasses this price. It provides more control over the purchase price but may not be filled if the stock doesn't reach your specified price.

• Stop: Becomes a market order when the stock reaches a certain price, known as the stop price. It's used to limit losses or protect profits by automatically triggering a buy order when the stock hits a predetermined price level.

• Stop Limit: Combines elements of both stop and limit orders. You set a stop price to trigger the order and a limit price to specify the highest price you're willing to pay once the stop price is reached. It offers more control over the execution price but may not guarantee that the order will be filled.

For the sake of this episode, we'll be using the Market option. However, it’s important to remember that each investor has their preferences and risk tolerance, so feel free to choose the option that best aligns with your investment strategy.

06.- If we click on the small Value button under the 4 options that we just described, we also have the option to purchase a specific number of shares. For instance, if we have 100€ available but only want to invest 50€ in this transaction, we can select the "Number of Shares" option and enter the desired quantity.

07.- In this case, we'll opt for the "Value" option and slide the bar to the right on the screen. Alternatively, we can tap the small button next to the zero and enter the quantity that we want to invest. Lastly, we'll tap on "Review order", which will lead us to the final step before placing the order.

08.- On this screen, we'll find all the details about our transaction, including the type of order we've selected (in this case, market), the value of our purchase, the number of shares we'll receive, any commissions or currency exchange fees, and the total cost of the transaction. After reviewing everything and confirming, simply tap "Send buy order" to proceed.

09.- The purchasing process may vary in duration, ranging from a few seconds to hours, depending on the timing of our order placement. However, if the market is open at the time of our order, it typically takes only a few seconds. If all steps have been completed correctly, a confirmation message will appear at the bottom of the screen.

10.- Finally, we can tap the chart icon at the bottom of our screen, leading us to our portfolio overview page. Here, we can see big numbers which display our portfolio value. Additionally, we can also find the total amount invested in our account, and the returns on our various positions. Below, a chart shows our portfolio's performance over a specified time frame that we can change. Further down the page, we find a list of our holdings, which in this case will be the purchase we just made.

Keep in mind that any loss or gain visible on the platform is unrealized, indicating that it's theoretical and exists only on digital format. These gains or losses don't become realized until we decide to sell the position.

And voilà, there we have it! Our first purchase is complete, and we’ve officially become a rookie investor! Next week, we'll talk about The Story of Warren Buffett, exploring how he went from a rookie investor to one of the wealthiest people on the planet. If you have any questions, feel free to reach out to me on Instagram or via Email!

Before we say our goodbyes, don't forget to check out what I've bought this week down below. Until then, keep smiling, keep learning, and I'll catch you next time!

Trevor

Disclaimer: This post is NOT financial advice. It is intended for educational purposes only. Investing involves risks, and there is a possibility of losing capital. Always conduct thorough research and consider consulting with a financial advisor before making any investment decisions. Your financial well-being is important, so please invest responsibly.

Cash Movements

Unfortunately, there haven’t been any Cash Movements this week.

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