What type of software/brokerage setup do I need as a Beginner

[stevenmac2]

Hi Mark and Spencer,

I contacted Scott Trade on the question if I opened with the minimum and it fell below $500, would there be any penalties? - and they said no - so you were right about that.

Since I am new to all of this, I decided to take some of my funding money to pay off a credit card instead and some to primary savings, and I left $500 to open the account with Scott Trade. I figure if I placed all of it into the account, I will eventually burn through it being new to this.

Given that and with my limited knowledge on placing orders, I have a few questions:

1) With $500.00, do you have to buy in blocks of 100 shares? or could I find a top notch stock and buy for example 5 shares instead of 100 of a cheaper one? or is there a minimum number of shares that must be placed? Also, what is the lowest amount on purchase price for a piece of stock without it being classified by Scott Trade as Penny Stock?

2) I have been reading some about Money Managemet and along with that on keeping records when trading by incorporating a traders journal. I know that most people like to add in trading fees for a round trip so they know what their actual profit is. But I want to go further than that and ask about the taxing of it.

A) If I buy some stock and hold the stock in the market, my understanding is that I do not pay tax on that stock.

B) If I sell the stock before 1 year, I will pay a higher tax rate. If I sell after 1 year, I will pay a lower tax rate (I still need to find what these capiatal gains rates would be based off of). If I sell the stock and the cash is in my brokers account, do I still have to pay tax on it or do I pay when I actually withdraw that money from the brokerage?

And if I do need to pay tax on a sale of a stock, should I not include this into my trading by including price of stock, fees, and tax to understand my overall profit and breakeven point? At the end of the year, what would I need to present for tax purposes?

If you wouldn't mind explaining how you track and handle this, that would help me have a better understanding of this.

Thanks for your time and assistance to answering,

Steven Mac

[MDZ]

Hey, I was right then, now I am getting bold, lol.

I agree with you idea to pay off a credit card before investing in stock. You would have to make like 20%+ just to break even on the interest that the credit card company would be charging you, so good call.

1) No, you can buy as many or few shares as you choose. Each transaction is going to cost you $7.00, but it don't matter the amount of shares. Once the stock value is below $1.00, they charge you $7 + 1/2% of the amount. (If you buy 1000 shares at $.50 the cost Scottrade will charge is $9.50 { $7 plus 500 (1000 X $.50) X 1/2% (which =$2.50)})

2A) Right, you don't pay tax because there is no true gain realized until you sell or recieve dividends.

2B)

If I sell the stock before 1 year, I will pay a higher tax rate. If I sell after 1 year, I will pay a lower tax rate

I am pretty sure you are right here. Reason being you pay at ordinary income tax rate if sold before one year. If sold after, you are tax at long-term capital gains rate. The second part depends on what type of account you have. If it is in some type of tax defered retirement plan, then no. If it is a regular trading account, then the broker will send you a year end statement letting you know what you have to pay tax on.

And if I do need to pay tax on a sale of a stock, should I not include this into my trading by including price of stock, fees, and tax to understand my overall profit and breakeven point? At the end of the year, what would I need to present for tax purposes?

^ Not sure if I follow you on this, but I would definetly keep track of all your expenses in order to understand if you are really making money. And for tax purposes, I am pretty sure that your broker will send you all the information that you need at the end of the year.

Also, here is a link to an article that I found. You had me questioning myself on a couple of these, so I had to learn myself, which is good so thank you.

Action now could take chunk out of your tax bill later - USATODAY.com

Have a good one,

Mark

[stevenmac2]

Thanks Mark for all the cool info and for answering my numerous questions. Before I get started with much of this, I have just started reading tonight some of the material from the 5 Step Learning Program.

I just created an ID (stevenmac2) on Investopedia Simulator in the Silver Group and looking to get started with that for starters so I can get use to seeing this type of information.

Though the account has started me with $100,000, I am actually going to start trading in the simulator with $500 through the rest of the month to be realistic with the amount I plan to open with the Scott Trade account.

Thanks again for a fantastic support system here and a group of profressionals dedicated to everyone's success to trading in the market.

Steven Mac.

[MDZ]

Not a problem man, glad I was some help for you! I agree with the 100k being a little out of proportion for the average trader who is just getting started. Hope to see you around the forums some more.

Have a good one,

Mark

[stevenmac2]

I hope to be on the boards a little bit more - I love what I am learning already here on FIO.

Thanks,
Steven