What does buying stock mean?
Buying a stock means you own a small percentage of a company you think will continue to increase in value.
Newcomers to the stock market should begin by opening an online brokerage account or through a face-to-face broker.
You can skip paying the broker fees if you buy stocks directly from the company. Not all companies provide this option, but there are several hundred who do. You can find out which ones allow investors to buy shares from them directly by going to websites like DRIPInvestor.com.
How do I buy stocks myself?
- Open a brokerage account
- Pick your stocks
- Choose number of shares to purchase
- Pick your order type
- Maximize your trades
Overview: how to buy stocks
1. Open a brokerage account
There are many brokerage firms in the marketplace for you to choose from.
Many of these companies are very similar although some have more user-friendly features or apps that might suit your needs better.
Search for one that offers convenient customer service and quality investor education instead of one that has the lowest trading commissions.
Here are some other factors to evaluate:
- Minimums: The majority of these brokerages have either no minimum or a low threshold like $50 allowing you to build your investment portfolio overtime.
- Trading fees: The commissions for trading continues to drop. Some are free, so if you trade often, you won’t be shelling out as much money in fees. Many others charge an average low fee of $5 per trade. Depending on how often you trade, the fees can add up quickly.
- Broker resources: You’ll also want to consider factors like the kind of advice and research tools from the broker, the quality of the digital trading app and the ability to place trades quickly and reliably, among other things.
Once you have chosen a brokerage, you can open an account and fund it by linking your checking account and transferring money online or by snail mail into your new brokerage account. After your deposit clears, you can start buying stocks.
Check out Bankrate’s top picks for best online brokers for stocks in 2019:
- Fidelity – Best for investing research
- TD Ameritrade – Best for beginners
- Charles Schwab – Best for low fees
- Robinhood – Best for digital user experience
- E-Trade – Best for ongoing education
- Ally – Best for cheap trades
2. Pick your stocks
After you choose a brokerage, you can learn how to start investing in stocks.
There are many ways to conduct research on the companies you’re interested in making an investment. One way is to read articles written by the financial media and watch or listen to reports from podcasts, radio and televisions shows.
Reports written by analysts who focus on the earnings, cashflow, revenue and profit margin of companies are sometimes public or covered by journalists.
Many brokerages also provide reports from analysts, the media and industry groups.
Since these companies are public, they must provide information to shareholders on their own websites or through the Securities and Exchange Commission. You can read their quarterly earnings, annual reports, conference call transcripts and news about acquisitions or financing for free.
3. Choose number of shares to purchase
Experts advise investors, especially novice ones to trade carefully. Making smaller investments over a period of time decreases the amount of risk.
You can even buy just one or two shares of company until you understand how the company operates or how different trading strategies play out.
Once you get comfortable, you can purchase stocks in groups of 5 or 10 shares at a time and build your position over time.
4. Pick your order type
After evaluating a stock, decide the prices you would like to purchase it at.
Determine ahead of time if you want to make a “market” or “limit” order.
A market order means you will buy or sell the stock at the best available price that is available. A market order means as soon as you hit the submit button on your laptop or app, the order will occur immediately and will fill.
A limit order means you will only buy the stock at a specific price that you choose. If you enter in an amount that is too low and there are no buyers, your order will not be filled.
5. Maximize your trades
Buying and selling stocks can seem like a fool’s errand, but time, patience and education are the keys to a successful outcome.
Be aware of the fees charged each time you both purchase stocks and sell stocks.
Investing in stocks is a good strategy to build your wealth over time and generate income for your retirement. Once you have tried various trading strategies and developed your own personal investment strategy, you will learn how to make money in stocks. The downfall of many investors is trading with their emotions or being fearful of volatility, but conducting research and making disciplined decisions will go a long way.