- 1). Determine your financial goals when choosing to invest in the European Stock Market. Do you wish to receive exposure to a variety of European stocks? In this instance, the best instrument would be a mutual fund that specializes in European stocks. There are several advantages to this option. First, you do not have to research individual companies. Second, the trades are monitored and placed through your broker. Third, this provides the best option if you are trading with a sense that the European economy will provide you with a greater return than any other economy you invest in.
A European mutual fund will be available for all types of investors: high risk tolerance, moderate risk tolerance and low risk tolerance. Determining your risk tolerance indicates how aggressive of a fund you wish to trade. In addition, some funds are separated by the size of the companies traded. There are large cap, mid-cap and small-cap funds. Large cap European funds will invest in the largest European companies, while small-cap funds will invest in small, relatively unknown firms. It is important to see what type of companies or types of industries are traded within a mutual fund portfolio. - 2). Find where you should trade a European mutual fund. If you already have an established brokerage house you trade with, discuss your alternatives with it. Another good source of information on mutual funds is Morningstar, a highly recommended independent investment rating company. Morningstar will provide information on various European mutual funds and how they perform against benchmarks such as the S&P 500, Dow, FTSE 100 and other similar risk level European mutual funds. If you need to find a broker, see Resources.
- 3). Pick an individual stock. If you are simply interested in investing in a European company, you may not need to trade on a European exchange. Many European multinational companies have their stock listed on the New York Stock Exchange and on a European stock exchange. For example, British Petroleum is a multinational company that trades on the New York Stock Exchange and the London Stock Exchange (LSE). If you wish to trade British Petroleum on either exchange, a U.S. brokerage firm will have access to trading on both exchanges. Typically the pricing of the stock will not be different on the two exchanges. But the commissions charged by your broker may be different. Discuss commission charges with your brokerage firm prior to investing on any market. For more information on commissions, see Resources.
- 4). Choose a brokerage firm that has branches in Europe and the United States. If you wish to place trades on a European stock exchange, another choice would be to work directly with a European arm of a U.S. brokerage firm.
- 5). Look for other brokerage alternatives. If you definitely want to trade stocks on the London Stock Exchange, then try its website (see Resources). The LSE has online information on local brokerage houses in London that can be used to establish a European trading account and place trades.
- 6). Select an individual European stock to trade. If you are set against mutual funds, there are several resources at your disposal for information on European stock exchanges. If you do not have an idea on which European stock to trade or you cannot find information on your favorite European firm, visit Reuters.com. This firm is a very reputable provider of financial information. It often offers investment advice, but remember advice is not a rule.
When on Reuters, use the keyword search box on the top right-hand side of the screen. Type in the words "European securities." Articles on publicly listed European firms will appear toward the middle of your screen. Read through this information to find which company you are interested in. Then, return to the search area and type in the name of the stock or company you have selected. A screen should appear with the most recent stock quote, a link to the company, financial information, investor information and research reports. - 7). Look for information at your brokerage firm for information on your favorite European corporate stock. The broker will be able to tell you if the European company you wish to invest in is a publicly listed company. It will also be able to provide you with the latest research produced by its research department. Always ask if other European corporate stocks are recommended to buy. You can then compare information and decide which stock to purchase, how much to invest and how many shares to purchase. You do not have to take the broker's recommendation on European corporate stock investing. Ultimately it is your money, and you make the final decisions on where to invest it. Remember to go to the website for the European corporate stock to check for additional information.
- 8). Determine how much money you will invest or how many shares you wish to purchase in this European corporate stock. For example, if the market price is $10 and you wish to invest $1,000, you can purchase 100 shares. Or if you wish to place an order for 500 shares, simply place the trade as such and you will receive the market price for your 500 shares of European stock.
- 9). Finalize your European corporate stock investment choice. Make sure you understand how the pricing and quotes for this stock work before you place your trade. This will allow you to track the value of your trade.
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Hiring a broker is necessary at this point in the trading process, because brokers provide access to the stock market. A non-licensed individual cannot place trades by himself directly to an exchange trading European stock. To gain entry to the stock market and purchase a stock, you must use a person licensed to trade and provide assistance in the markets. If you do not know where to find one, check with your personal financial adviser, accountant, bank or friends to get a few recommendations. - 11
Start a new trading account to trade European stock through a broker. Brokerage firms start a trading account for each individual client. This account is used to track what is bought and sold, any trading limits or specifications you have on your account and the funding of your accounts. The brokerage firm will also make arrangements as you direct for transferring money from your banking account to the brokerage to pay for your transactions. - 12
Discuss with your broker information on what sales, maintenance and commission charges to expect on your account when purchasing the European corporate stock. Find out if the commission charge changes based on how much stock you buy and sell in a block, or the number of shares of the same stock that you purchase at one time. For example, the commission rate on a block of 10,000 shares of stock is likely to be much less than a commission charge on 100 shares. There typically is a commission charge to purchase a stock and another charge when you want to sell a stock. - 13
Place the final order for the European stock or European mutual fund with your broker. Placing the order also requires some expertise. A broker will provide advice on how to place an order based on if you want to buy your European stock at a specific price or the current market price. The broker can also set a standing price order to sell your European stock if the price increases or decreases. This order to sell can be placed at any level you wish. Remember to figure in the cost of commission to determine the level at which your trade is profitable. - 14
Receive trade information confirming that you have purchased European stock. This confirmation will include how many shares you own, the price you paid and your commission charge. - 15
Discuss with your broker any concerns you may have if the European stock begins to lose value, such as when you want to sell the stock. You can set limits above and below the price at which you bought your stock. For example, if you purchased European Stock at $60 per share, you can place an order to sell your stock at $80 per share. When the stock rises to that price, it will be sold, a commission charge will be removed from your transaction and the funds will be deposited into your account. The same is true for if the stock loses value. For example, a sell order can be placed at $40 per share. If the price of the European stock drops to this price, it will automatically be sold.
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