Editor’s note: This article was first published in December 2011, days before Zynga’s Nasdaq IPO; Zynga was acquired by Take-Two Interactive in 2022 and is no longer listed. All brokerage fees cited are Selfbank’s 2011 tariffs, and fees for trading US shares have changed substantially since.
A while ago we explained how to invest in the various US markets. We described several ways of doing it then, but today we’ll keep things practical and simple, because, believe me, anyone can invest in both their home market and foreign markets very easily. Of course, the commissions for investing outside your own country are higher.
Interest in the US stock market has grown considerably, especially now that we’re close to the IPO of a tech giant like Zynga. Facebook will be going public soon as well, and both are stocks that could produce a large gain in a short period of time (hours). Here’s the simple process, so you can see how easy it is.
1. Choose your bank (broker)
The terms vary considerably depending on how much you want to put into your stock market investment and how you plan to use it. Read the small print in every document, because when you open a brokerage account the word “free” tends to come up a lot. Bear in mind that nothing is free with no strings attached. I’ll use the bank I currently invest with, Selfbank, as an example.
With Selfbank, you can trade on the Spanish market from €2.95 per buy or sell order if the amount is under €1,500. Up to €6,000 the price per trade is €5.95, and so on, up to a 0.07% commission for amounts over €60,000.
For international markets, the commission is €13.95 plus an extra €2 surcharge on the sell order. In other words, simply buying into the US market and getting out five hours later would already cost us close to €30.
Once we know this and are clear about it, we open a brokerage account with the bank of our choice. I’d advise you to compare prices among online banks, as they usually offer better terms.
What should you know when investing in the US stock market?
In Selfbank’s case (and you’ll need to check these details with other banks too), the custody fee is FREE, except that for it to be free you have to make three trades a month in that same market, so it isn’t really free.
2. Choose the platform
There’s the basic platform, which is free. But if you don’t intend to invest for the medium to long term, make sure the trading platform offers real-time data: that is, that it shows the share’s actual current price, not the one it had two minutes ago. In the short term, and with these stocks, a lot can happen in two minutes on IPO day.
Then there are several other platforms. In Selfbank’s case, these are Trading Center and Trader Pro, both free as long as you make a minimum number of trades each month.
Once we’ve read the terms, we sign up for the platform that suits us best, always keeping in mind the amount we’re going to invest and the trades we plan to make in the market.
3. Find the stock
As a rule, we should know which market the stock trades on. If we don’t, we use the platform’s search tool: we enter the company’s name or its ticker and choose “all” markets. In my example I searched for Microsoft, which turns out to be listed not only on the Nasdaq but also on XETRA and in Amsterdam.
In the case of Zynga, it will trade on the Nasdaq, so that’s the market we choose.
4. Buy the stock
Once we’re ready to acquire the stock, we go ahead and buy. We simply enter the number of shares we’re going to buy in the relevant fields.
Next, we have the option of making the buy order conditional by setting a stop, either above or below the price. I’m not in favour of conditional orders like these, although for someone without much experience they may be advisable, since at least you can rest easy knowing you won’t lose more than the level set in the stop.
Once all this is done and we’re happy with it, we confirm the order and that’s it: we’ve bought the shares.
Further reading
- Investment guidelines for 2012
- Which stocks to invest in when markets move in unison
- The safest and most profitable investments in times of crisis
Featured image: Faustino Garcia, CC BY 2.0, via Flickr.
