In an earlier post I discussed how to avoid problems when buying Mutual Funds. In this posting I’ll discuss the best way to but stocks and ETF’s.

 Let’s examine how people normally buy a stock or ETF, they just enter the number of shares and hit “Buy”. This is what is called a “Market Order”. You agree to buy at whatever the current “ASK” price is. Here are some suggestions on how to buy at the right price regardless if you are a short term or long term investor. 

Do not place a buy or sell order after hours or over a weekend. Early morning volatility can be huge. Large institutional blocks can get moved during the 1^st and last hour of trading every day. This results in the little investor, you and me getting our orders priced at a less preferred level. Take a look at recent Apple trading ranges in just 1 day.

Here is a morning spread showing market large gaps between the “Buy and Sell” prices for a common stock.

Always use “Limit Orders” when buying and selling. A Limit Order allows you to specify an exact price you want to buy or sell at. It provides some level of protection. For a long term investor you can easily place an order for your “watch list” stock at a recent low and just wait for the price to come down. You can choose “good till canceled” GTC to wait for your price.

Here is an example of a Limit Order.