Buying stocks is easier than most people think. With today’s online brokers, you can open an account, transfer money, and make your first investment in just a few steps. The process is simple, even if you’ve never traded before.
This guide breaks down how to buy stocks in four clear steps. You’ll learn how to set up a brokerage account, research companies, read stock quotes, and place your first order with confidence.
Beginner’s Guide to Buying Stocks in Five Steps
If you’re new to investing, the stock market can seem overwhelming at first. Breaking it down into four simple steps makes the process clear and manageable, starting with opening a brokerage account.
Step 1: Open a Brokerage Account Online
The first step to buying stocks is opening a brokerage account. This is where you deposit money, place trades, and hold your investments. Most people choose an online broker because it’s quick to set up and easy to manage from your phone or computer.
There are two main decisions to make when opening an account:
1. Brokerage Account Type
- Taxable account: The most flexible choice. You can withdraw money anytime, but you’ll pay taxes on any gains.
- Traditional IRA: Lets your investments grow tax-deferred until retirement. You’ll pay taxes when you withdraw the money.
- Roth IRA: Uses after-tax dollars, but withdrawals in retirement are tax-free. You can also take out your contributions at any time without penalty.
2. Broker Style
| Broker Type | Who It’s Best For | What You Get |
|---|---|---|
| Discount Broker | Beginners and do-it-yourself investors | Low or no commissions, simple apps, research tools, less personal guidance |
| Full-Service Broker | Investors who want guidance | Access to financial advisers, customized advice, higher fees |
If you’re just starting out, a taxable account with a discount broker is usually the easiest way to begin. Popular online brokers include Robinhood, Fidelity, Charles Schwab, and Vanguard, all of which offer commission-free stock trades and beginner-friendly platforms.
Step 2: Fund Your Brokerage Account
Once your account is open, you’ll need to move money into it before you can start buying stocks. Most brokers give you a few different ways to add funds:
- Bank transfer (ACH): The most common method. You connect your checking account, and the transfer usually clears within one to three business days.
- Wire transfer: A faster option that often arrives the same day, but your bank may charge a fee.
- Check deposit: Some brokers still accept mailed checks or mobile check deposits, though it takes longer to process.
Many brokers let you set up automatic transfers, which is a smart way to invest regularly without having to think about it. Just remember that the money has to clear in your brokerage account before you can place your first order.
Step 3: Research and Choose Stocks to Buy
With money in your account, the next step is deciding what to invest in. Choosing stocks can feel overwhelming at first, but keeping things simple will help you get started with confidence.
A good place to begin is with companies or industries you already know. If you use their products or services regularly and believe in their long-term future, they may be worth a closer look. From there, review the company’s fundamentals like revenue growth, annual reports, and earnings trends to see if it looks financially sound.
Here are a few common approaches beginners often use:
- What you know method: Buy shares in companies whose products or services you understand and believe in.
- Index-plus method: Put most of your money in a broad market ETF like the S&P 500, then use a smaller amount to experiment with individual stocks.
- Dividend approach: Focus on companies that pay steady dividends, which provide cash payouts in addition to potential growth.
Most brokers also provide research tools like stock screeners, analyst ratings, and real-time news updates. These can help you compare companies and build a shortlist of investments that fit your goals.
Step 4: Review Stock Quotes and Key Numbers
A stock quote tells you what’s happening with a company’s shares at any given moment. Learning how to read a quote helps you decide whether it’s a good time to buy.
- Bid: The highest price buyers are currently offering.
- Ask: The lowest price sellers are willing to accept.
- Last price: The price of the most recent trade.
- Trading volume: The total number of shares exchanged during the day.
Quotes are updated throughout the trading day, so prices can change quickly. Free sources like Yahoo Finance and Google Finance show live data, and your broker’s platform will display the same information, often with interactive charts and analysis tools.
Step 5: Place Your First Order
Once you’ve picked a stock, it’s time to place your first order. This is where you decide how many shares to buy and what type of order to use. The order type tells your broker how to complete the trade.
| Order Type | How It Works | Best For |
|---|---|---|
| Market order | Buys the stock immediately at the best available price | Beginners who want a quick and simple trade |
| Limit order | Sets the maximum price you’re willing to pay; the trade only goes through if the stock reaches that price | Investors who want more control over cost |
| Stop order | Triggers once the stock hits a set price, then executes as a market order | Investors who want to limit losses or protect gains |
If you’re new, a market order is usually the easiest way to complete your first purchase. A limit order can be useful if you only want to buy at a certain price, while stop orders are more advanced and often used for risk management.
Many brokers also offer fractional shares, which let you buy part of a share instead of a full one. This means you can invest in companies with high share prices, like Amazon or Google, with as little as $10 or $20. Fractional shares make it easy to start small and still own pieces of big-name companies.
Before submitting your trade, double-check the number of shares and total cost. Once you confirm, you’ll officially be a shareholder.
What to Do After Your First Stock Purchase
Buying your first stock is an exciting step, but what comes next is just as important. The way you manage your investments over time will have the biggest impact on your results.
Check in on your investments periodically—monthly or quarterly is usually enough. Watching prices every day often leads to emotional decisions and unnecessary trades. Instead, focus on the company’s long-term performance and whether it’s still aligned with your goals.
Two strategies can help you build wealth more consistently:
- Diversify: Spread your money across different companies, industries, or add exchange-traded funds (ETFs) and mutual funds. This reduces risk and helps balance out ups and downs.
- Dollar-cost averaging: Invest a fixed amount on a regular schedule, like $100 each month, regardless of market conditions. Over time, this smooths out price fluctuations and removes the pressure of trying to time the market.
You can also reinvest dividends, which lets you automatically buy more shares without extra effort. These small, steady steps can make a big difference in your portfolio’s growth over time.
Common Mistakes First-Time Investors Should Avoid
Getting started with stocks is exciting, but new investors often fall into the same traps. Keeping these mistakes in mind will help you stay on track:
- Investing without a plan: Define your goals and time frame before buying. Are you saving for retirement, building wealth, or just learning the basics?
- Putting all your money in one stock: Even strong companies can decline. Spread your investments across multiple stocks or add ETFs for balance.
- Trading too often: Constant buying and selling usually hurts performance. A patient, long-term approach works better for most beginners.
- Chasing “hot” stocks: By the time a stock makes headlines, much of the big move may already be over. Focus on long-term growth, not hype.
- Overlooking taxes and fees: Even with commission-free trading, short-term gains are taxed at higher rates. Factor in costs before making decisions.
Best Online Brokers and Trading Platforms for Buying Stocks
The best stock trading platforms combine low fees, helpful research tools, and easy-to-use apps. Customer support also matters, since you want quick answers if you run into issues. Here are some top options for beginners:
- Robinhood offers commission-free stock trading with a simple mobile app. It’s best for beginners who want a quick and easy way to get started.
- Webull provides commission-free trading with a modern mobile app and advanced charting tools. It also includes paper trading and extended hours, making it a solid option for beginners.
- Charles Schwab offers a comprehensive trading platform with powerful research capabilities. You also get access to a wide variety of financial products, and Schwab offers 24/7 customer service.
- Fidelity offers comprehensive research and market analysis tools, low trading fees and commissions, and a dedicated customer service team.
- Moomoo offers commission-free trading with advanced research tools and real-time market data. It’s a good option for beginners who want more depth without extra fees.
Frequently Asked Questions
What is the risk associated with investing in stocks?
Stocks can go up or down in value, sometimes quickly. Prices are affected by company performance, economic trends, and market sentiment. While stocks have strong long-term growth potential, short-term volatility means there is always a chance of losing money.
What are the costs associated with buying and selling stocks?
Most brokers now offer commission-free trades, but there can still be costs. You may pay account fees, margin interest, or other service charges. When you sell a stock for a profit, capital gains taxes may also apply.
How old do you have to be to trade stocks?
In the United States, you generally need to be at least 18 years old to open a brokerage account. Some brokers and states set the age at 21. Younger investors can still get started with a custodial account managed by a parent or guardian.
How much money do I need to start investing in stocks?
You don’t need thousands of dollars to begin. Many brokers let you start with as little as $100, and some even offer fractional shares so you can buy part of a stock. The key is to start with an amount you’re comfortable investing and build from there.
How much money can I make from investing in stocks?
There’s no set limit on how much you can earn. Your returns depend on which stocks you choose, how long you hold them, and market conditions. Some investors see steady growth over time, while others experience losses. That’s why patience and diversification are important.
