Opening a stock account is a big decision. It’s not something you do every day, so it pays to know what you’re getting into before making your final decision. In this blog post, we will discuss few things that are important for anyone looking to open a stock account.
- You need to put money into your account
It is pretty obvious, but it’s the first step. If you have no money in your stock market account, there won’t be anything to invest and make profits on! So you’ll want to start by depositing some funds (you can do this through an electronic transfer or via check). The US stock account opening (美股開戶) minimum limit is generally $500, but you might be able to start with less.
- You need to understand that stock prices fluctuate
When you invest in a company, the share price of that company can go up and down. Many factors could affect this (rising costs, economic changes etc.). If your money is invested for longer periods, fluctuations will be less noticeable because they’ll smooth out over years or decades.
- You may get steady dividends
Many companies that hold shares will offer to pay out a dividend (a share of their profits) each year. It is something extra on top of the rise and fall in price which your investment experiences. Dividends can be pretty reliable, but they also vary from one company to another.
- Diversification is key
Diversification means owning more than one stock. If you put all your money into only one company and that company experiences a sharp decline, then it could have a knock-on effect on the rest of your portfolio. That is why experts recommend diversifying as much as possible so that if there’s any downside to an investment (e.g. some stocks perform worse than others), you won’t lose out too badly overall.
The odd lot (碎股) is a small number of shares which isn’t enough to be called ‘standard’ or ’round lot’. It can have more impact on the share price than you might think, so diversifying your investment will help reduce this risk.
- You might end up owing capital gains
If you’ve been holding a stock for less than a year, then any profit made on your shares will be considered as “short-term” and taxed. If you hold the same investment for longer than a year before selling it, then they’ll be treated as long-term investments and won’t incur this tax.
- You may have to pay a fee
If you buy and sell stocks in your account, there’s a good chance fee will be applied. These vary from one broker or platform to another but can often add up to several hundred dollars per year.
- You should try to invest regularly
If you make a lump-sum investment, then the chances are you’ll end up paying more in fees and will not get as good returns. Instead, experts recommend investing small amounts over time (e.g. monthly) so that costs stay low and your money can grow steadily month on month without taking too big of a hit from commission charges.