Many investors buy shares online through an investment account with an online broker. You can also buy shares through a full-service broker. Some companies allow investors to buy shares directly.
Buying a stock - especially the first time you become a legitimate business owner - deserves its celebration ritual. But before choosing share hats and renting a confetti cannon, let's take a look at the steps specific to the stock purchase procedure.
Step 1: Open an online brokerage account
Want to know where to buy shares? Movies love to show frantic traders orders shouting on the floor of the New York Stock Exchange, but few stock trades take place this way. Today, the simplest option is to buy shares online via an online broker.
Online brokerage account opening is as easy as creating a bank account: you fill out an account application, provide proof of identity, and choose how to finance your account. You can fund your account by sending a check or by transferring funds electronically.
How do you find a broker worthy of your mass? It's not just about finding the one who offers the cheapest bargaining fees. Paying a few extra dollars per transaction at a brokerage firm offering quality customer service is well worth it, especially when you are new to buying stocks.
Some other factors to consider when opening an account to buy shares:
How much money do you have? Many online brokers require a minimum of $ 0 to create a traditional individual retirement account or Roth IRA. For a typical brokerage account, the minimums can range from $ 0 to $ 2,000 or more.
How often do you intend to trade? In most brokers geared to new investors, online stock trading fees range from $ 5 to $ 10. The low cost of commissions will be greater for active traders, those who trade 10 or more transactions per month. (Learn more about the intricacies of stock trading.) Infrequent operators should avoid brokers who charge for downtime charges.
How much support do you want? Consider offering educational tools, investment advice, stock research, and access to real people via phone, email, chat, or affiliates.
Step 2: Select the stocks you wish to purchase
Once you have set up and funded your brokerage account, it's time to get into the stock-picking business. The best place to begin is to look for companies you already know from your consumer experiences.
Do not let the flow of data and market fluctuations in real-time overwhelm you as you search. Keep it simple: you are looking for companies for which you wish to become co-owners.
Warren Buffett said, "Buy a business because you want to own, not because you want the stock to go up." He followed this rule very well.
Start with the company's annual report, particularly the annual letter from management to shareholders. The letter will provide a general account of what is happening in the business and provide context for the figures in the report.
After that, most of the analytical tools and information needed to evaluate the company will be available on your dealer's website, such as SEC filings, teleconference transcripts, quarterly earnings updates, and news. Most online brokers also offer tutorials on how to use their tools and even basic stock selection seminars.
Step 3: Determine the number of shares to buy
You should have no pressure when it comes to buying a certain number of shares or to fill your entire portfolio with one stock at a time. Consider starting small - very small - by buying a single action to get an idea of what an individual action is, and if you dare to deal with reduced sleep loss. You may add to your position over time while mastering the arrogance of shareholders.
Step 4: Choose your type of stock order
Do not worry about all these absurd numbers and word combinations on your broker's online ordering page.
There are many more sophisticated trading movements and complex order types. Do not bother now - or maybe never. Investors built a successful career by buying stocks with only two types of orders: market orders and limit orders.