Even though buying stocks is not a complicated process, you will definitely need to do some research before you start your investing journey. You will first need a brokerage account, which can be easily set up. Then, once you have made your first deposit, you can follow the steps provided below to choose and invest in specific companies.
The most efficient way to buy stocks is through an online stockbroker. Following your account’s set up and your first deposit, you can start buying stocks through the broker’s website in a few minutes. You could also use a full-service stockbroker or buy stocks directly from the company.
Opening an online brokerage account is as easy as setting up a bank account. You first complete an application, provide identification proof and choose whether you want to fund the account by transferring funds online or mailing a check.
Once you complete the set up and fund your account, it is now time to pick the business from which you would like to buy stocks. A good starting point is researching about the companies you already know from your experience as a customer.
No need to be overwhelmed by the great amount of data available while conducting your research. Keep the objective simple: You are just searching for businesses of which you would like to become a part owner. Once you have found a company you would like to invest in it’s now time to do a little research. Start with the company’s annual report and especially pay attention to the management’s annual letter to shareholders. This letter will provide you with an overall narrative of what’s happening within the company and context for the numbers in the report. Having read that, you will now need to use one of the analytical tools available on your broker’s website, such as SEC filings, conference call transcripts, quarterly earning updates and recent news. Most digital brokers also offer tutorials on how to use their tools and even basic seminars on how to pick stocks.
There is no need to buy a certain number of stocks or fill your entire portfolio with a stock all at once. You should consider starting small by purchasing just a single share to understand what is like owning individual stocks and whether you are able to make it through the rough patches. You can always add more stocks later.
New investors could also consider fractional shares, which is a new offering provided by online brokers which enables you to purchase a portion of a share instead of the full stock. This means you can easily delve into pricey stocks with a much smaller investment. Several brokerages also offer a tool which converts dollars into shares too which can be particularly helpful if you have a specific amount you would like to invest and want to know how many stocks you could buy with it.
No need to be discouraged by all those definitions and complex word combinations on your broker’s online page. You can refer to this sheet of basic stock-trading terms:
| Term | Definition |
| Ask | For buyers: The price that sellers are willing to accept for the stock. |
| Bid | For sellers: The price that buyers are willing to pay for the stock. |
| Spread | The difference between the highest bid price and the lowest ask price. |
| Market order | A request to buy or sell a stock ASAP at the best available price. |
| Limit order | A request to buy or sell a stock only at a specific price or better. |
| Stop (or stop-loss) order | Once a stock reaches a certain price, the “stop price” or “stop level,” a market order is executed and the entire order is filled at the prevailing price. |
| Stop-limit order | When the stop price is reached, the trade turns into a limit order and is filled up to the point where specified price limits can be met. |
You can find many other trading moves and distinct order types. Don’t bother for now. Most people build successful careers purchasing stocks using only two order types: market orders and limit orders.
Using a market order shows that you will sell or purchase the stock at the best available market price.
Due to the fact that a market order does not set a price parameter on the trade, your order will be executed immediately and fully filled, unless you’re trying to buy millions of shares and attempt a takeover coup.
Also keep in mind that the price you pay or receive might not be the exact price you were quotes seconds ago as prices fluctuate constantly throughout the day. That’s why using market order is the best choice for stocks that don’t experience wide price swings.
Using a limit order provides you with more control over the price at which your trade is executed. For example, if a stock is trading at $100 a share and you think $95 per share is more in line with how you value the company, your limit order tells your broker to hold tight and execute your order only when the ask price drops to that level. When sellings are involved, limit orders inform your broker to part with the shares once the bid rises to the level you set.
In general, limit orders are a good tool for investors who buy and sell smaller company stocks that tend to experience wider spreads, depending on investor activity. They are also good for investments during periods of short-term stock market volatility or at times when stock price is more important than fulfilling the order.
You should be aware that all investors go through rough patches. The key to escape from these difficult situations in the long term is to keep your perspective and focus on the things you can control. Once you become familiar with the stock purchasing process, you should take the time to dig into other areas of the investment world. You could explore the way in which mutual funds take part in your investment story, or you could set up a retirement account such as an IRA. Opening a brokerage account and buying stocks is a great first step, but it is really just the tip of the iceberg.