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Taking the plunge
Where does the theory meet the practice? I imagine that you have heeded all the advice regarding investing when the market prices are depressed, and you have decided to take the plunge.
Let's imagine that you have also decided which stocks to invest in, meaning, you have decided on an allocation. What are the steps involved for a first-time equity investor?
The first and most basic step involved is to choose a broker through which you will purchase your shares. There is no way around this step.
After you have funded the account, the next step is to place your order. Now, whether you place it by calling/e-mailing your broker or by using an online platform, you will have to determine how much money is to be spent per stock and decide whether you are placing a market order or a limit order.
A market order means that you have told your broker or the online platform that whatever the market price is, you are willing to purchase at that level. The dangers are many with using a market order. Typically, stocks will trade at different levels in the day, sometimes going quite high (but within the circuit- breaker rule).
Now, you may just be very unlucky and end up paying the highest price for the stock and discovering that it has closed at a lower average. I really don't recommend putting in an order using the market price.
The limit order is as it sounds. When inputting your order, you again specify the quantum of the funds, in addition to the specific price (or the limit that you are willing to pay).