Questions to ask yourself before you trade
Here are some of the choices you'll need to make to trade online.
POINTS TO KNOW
- Common stock is the type of stock that investors purchase most frequently.
- Holding a stock "in street name" makes it easier to sell it later.
- There are 4 order types for buying and selling stocks and ETFs.
What type of stock do you want to buy or sell?
Good to know!
Getting in on the ground floor
You may have heard people talk about companies that "go public." Example: Facebook in 2012.
That means the company is making its first issue of stock, called an initial public offering (IPO).
Vanguard Brokerage doesn't underwrite these offerings, so you can't participate in the IPO. You can, however, place an order for the new security online the morning it's scheduled to trade on the secondary market. Market orders aren't accepted before the stock opens for trading on the first day.
How do you want to hold the stock?
When you buy shares of a stock, you can have the stock registered in your name or you can have Vanguard Brokerage hold the shares "in street name."
Instead of getting a paper stock certificate with your name on it, the record of your purchase of stock shares is usually stored electronically.
This arrangement is beneficial for 2 reasons:
- We can easily and safely transfer securities between parties if you sell your shares. You don't have to deliver paper certificates to us.
- It's safe. You don't have to worry about the loss of security certificates or their costly replacement.
What about dividends?
If Vanguard Brokerage maintains your securities, all dividends and interest earned are credited to your money market settlement fund unless you choose to reinvest them in additional shares of the security that issued them.
If you hold the securities in your name, payments will be sent directly to you by the company you've invested in.
What type of order do you want to place?
How long do you want your order to remain in effect?
You have 2 options:
- Day order: Your order will expire automatically at the end of the trading day if it's not executed or canceled.
- 60-day order: Your order will expire in 60 days if it's not executed or canceled. This order is also known as a good-till-canceled order.
Next step: Gather your information
You're now ready to place your order. It helps to have this information handy:
- Account you're using.
- Name and ticker symbol of the stock or ETF you're buying or selling.
- Number of shares. (You can't request a trade by a dollar amount.)
- Order type.
- Your Vanguard money market settlement fund balance (if you're buying shares).
Keep in mind …
Stocks & ETFs
A security that represents ownership in a corporation. Holders exercise control by electing a board of directors and voting on corporate policy. In the event of a company's liquidation, common stockholders have lowest priority and receive assets only after bondholders, preferred stockholders, and other debt holders have been paid in full.
A security that takes precedence over common stock when a company pays dividends or liquidates assets. Preferred securities do not usually carry voting rights.
Stock of companies based outside the United States or that are represented by American Depositary Receipts (ADRs).
A single unit of ownership in a mutual fund or an ETF (exchange-traded fund) or, for stocks, a corporation.
Any action by a company that affects its shareholders, such as mergers and stock splits.
An option given to a company's employees to buy a certain amount of stock in the company at a certain price within a specific time period.
The distribution of the interest or income produced by a mutual fund's holdings to the fund's shareholders, or a payment of cash or stock from a company's earnings to each stockholder. Dividends can be distributed monthly, quarterly, semiannually, or annually.
Income you can receive by investing in bonds or cash investments. The investment's interest rate is specified when it's issued.
A money market mutual fund that holds the money you use to buy securities, as well as the proceeds whenever you sell.
An order to buy or sell a security at a specified price (limit price) or better. The execution is not guaranteed.
An order to buy or sell a security at the best available price. Immediate execution is likely if the security is actively traded and market conditions permit. Execution price is not guaranteed and can vary during volatile markets.
An order that triggers a market order once a specified security price (the stop price) is reached. The order may execute at a price significantly different from the stop price depending on market conditions.
An order to buy or sell a security at a limit price or better once a specified price (the stop price) is reached. It's possible for the stop price to activate without the order executing in fast-moving market conditions.
The degree to which the value of an investment (or an entire market) fluctuates. The greater the volatility, the greater the difference between the investment's (or market's) high and low prices and the faster those fluctuations occur.