- Ready to invest alongside one of the greatest investors in history?
- Learn what to look for and how to fund an online brokerage account.
- Decide what order type is right for your investing strategy.
Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.B), first made Class B shares available to investors in 1996. Buffett, otherwise known as "The Oracle of Omaha," has a reputation as the most successful value investors in the world, with returns consistently exceeding the S&P 500 index for more than 50 years.
Fortunately, you can capitalize on Berkshire Hathaway’s success by buying and trading the company’s stock. This brief guide gives you everything you need to know about trading BRK.B.
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Founded in 1839, with offices in Omaha, NE, Berkshire Hathaway has a legacy that stretches back nearly two centuries. The current CEO, Warren Buffett, has spent the last 50 years as the CEO of the company. Over the years, Buffet developed a reputation as the best value investor in the world.
Berkshire Hathaway has controlling interests in many companies, and it’s a solid blue-chip large-cap company with hundreds of billions in earnings.
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Step 1: Choose a broker
In order to trade BRK.B shares, you’ll need to open a trading account with a discount broker. There are dozens of brokers in the United States and hundreds of offshore broker options.
While selecting your broker, compare their product offerings. Not all brokers are the same, and they vary in fees, platforms, and other factors. Here are the key features to look for in a prospective broker to let you trade BRK.B.
Your broker issues you with a trading platform for placing your trades. Platforms differ between brokers, but they all offer the basic features of buying and selling stocks with multiple order types available.
Most brokers also offer you the option of plugging in a third-party trading platform, like Sterling Pro or DAS Trader.
There is no reason for you to pay commissions on your trades. For frequent traders, commissions can take up a large percentage of profits, making it challenging to grow a small account.
Many discount brokers are moving towards a commission-free model, thanks to the success of trading apps like Robinhood. Robinhood’s commission-free model made it popular with millennial and Gen Z traders entering the market.
However, the rest of the discount broker industry followed suit, and today, many firms like TD Ameritrade and Charles Schwab offer commission-free trading.
Cash and margin accounts
Your broker will offer you a cash or margin account when you sign up. A cash account only lets you trade your available fund balance. You’ll also have to wait for the broker's clearinghouse to process the transaction after you exit your trade in order to see the funds in your account.
A margin account resolves this issue for day traders. By accessing margin accounts, the broker lets you “leverage” your trades by 3x the amount available in your account. Therefore, if you have $300 in your account, you can use it to buy up to $900 worth of BRK.B stock.
Real-time market data feeds
Your broker's trading platform comes with quotes delayed by up to 15 minutes. If you want access to real-time market data for asset pricing, you’ll need to pay an extra fee.
If you’re day trading, then real-time data is critical to your success. Delayed quotes are the better choice for swing traders or value investors.
Compare online stock brokers to find one that suits your requirements for costs, tradable assets, and more.
Step 2: Funding your account
After setting up your broker account, it’s time to deposit some funds and start trading. Most discount brokers accept deposits using wire transfers or debit cards.
However, it’s important to note that it might take the broker up to a week to credit your trading account with your first deposit.
Step 3: Decide your investment amount
When you fund your trading account, make sure you do it with money you can afford to lose. Depositing everything you have into your trading account is risky. Stocks are inherently volatile. What if you have to handle a financial emergency? You don’t want to be forced to sell your shares to fund an emergency, especially if the market is down that day. You could end up missing an opportunity or locking in a loss.
Step 4: Choose between a share of a stock or ETF
BRK.B stock is available to purchase on the market as a standalone stock. However, many ETF products hold BRK.B stock, such as the iShares Russell Top 200 Value ETF (IWX).
Buying an ETF not only gives you exposure to BRK.B stock, but it also gives you ownership of many other stocks that can help to spread out the risk in the ETF. ETFs are less risky than stocks, but as they are invested in multiple companies, they lack the price volatility you get with purchasing shares of a single company.
Step 5: Set up your order
After setting up your account, it’s time to take a look at the different order types available for trading BRK.B stock. Below are the four most common order types used in trading.
This order gets you into BRK.B stock at the price quoted when you submit your order. Unfortunately, you could end up filling above your target entry price, otherwise known as “slippage,” as the market could move between order entry and execution.
This order gets you into BRK.B stock at a price decided by you. For example, you place a limit order to buy at $100. The broker can only fill this order at the price you submitted, and not a cent more.
If you’re trading in fast-moving markets, the downside of using limit orders is that the price action might surge past your entry, and the broker doesn’t fill your order, or you only get a partial fill.
This order will sell when the stock reaches a certain price. For instance, you set a stop limit order to sell at $200, and the order only executes at this price.
This risk management tool helps you exit a position automatically. You base your stop loss on your risk tolerance. For example, if you buy the stock at $100, you could set your stop loss to $90. If the price drops to $90, the broker automatically sells your position so you don’t risk more than $10 of downside.
Step 6: Place the order
After opening and funding your account, it’s time to place your first trade. When you open your trading platform, you’ll enter the stock ticker BRK.B into the designated field.
The trading platform populates the data, and you enter the number of shares you want to buy and your market or limit order price. You’ll click the “Buy” button to buy BRK.B shares, and you’ll use the “Sell” button to exit your position, hopefully with a profit.
Step 7: Monitor portfolio performance
BRK.B stock is a large-cap and a slow-moving stock. If you want to trade volatility in price action, it’s best to trade the stock on earnings reports when the market has the greatest volatility.
If you’re day trading the stock, it’s best not to leave your trading platform while you are in the trade. Stay at your seat until you either reach your price target or bail out of the trade with a loss. Another way to manage this is to put in a stop limit or stop loss order, so you can be assured your trade will execute in the event you are away.