How To Buy Stocks in 5 Steps: Quick-Start Guide for Beginners | Stash Learn

How to buy stocks in 5 steps: quick-start guide for beginners

By: Team Stash• Reviewed by: Heather Comella

Published: May 07, 2024

• Updated: Sep 05, 2024

The 5 Steps to buy a stock

1. Choose an online broker

To get started, you might be wondering where to buy stocks. You’ll need to open an account with a brokerage, which is the firm that facilitates buying and selling of your stocks and other investments. You deposit money into your brokerage account, and your brokerage uses those funds to buy and sell stocks on your behalf.

Brokerage account options run the gamut from full-service firms with professional advisors to robo-advisors and online brokerages.

Full-service brokerages

Best for: high-net worth individuals and those with limited investment knowledge

Full-service brokerage firms offer a comprehensive range of financial services, including personalized advice from professional financial advisors. These advisors work closely with clients to understand their financial goals, risk tolerance, and investment preferences. They then create tailored investment strategies and actively manage clients’ portfolios, making adjustments as needed based on market conditions and changes in financial goals.

Online brokerages

Best for: self-reliant investors seeking more control

Online brokerages are digital platforms that allow investors to buy and sell securities, including stocks, bonds, and ETFs, on their own. These platforms offer a wide range of investment options and tools to assist investors in making informed decisions. Online brokerages are perfect for investors looking for more control over their investment portfolio as well as those seeking lower fees.

Robo-advisors

Best for: new investors and passive investors

Robo-advisors are a great option for automating investing for new investors starting to build portfolios and passive investors interested in a hands-off approach. Robo-advisors are automated platforms that use algorithms and artificial intelligence to build and manage investment portfolios. These platforms rely on users’ input, such as risk tolerance, investment goals, and time horizon, to create diversified portfolios of low-cost exchange-traded funds (ETFs) or index funds.

2. Research potential stocks to buy

Once you have a funded brokerage account up and running, it’s time to decide what stocks to buy. Buying a stock means buying a share of ownership in a company, and the value of the shares can rise or fall depending on the company’s performance. Because of this, you’ll need to research the companies you are considering buying shares in, with the goal of buying shares that you believe will go up in value over time. Neglecting research could expose you to unnecessary risks and may result in investing in companies that don’t align with your financial goals.

Once you’ve identified a company you want to research, here’s what to pay attention to:

Revenue: a company’s revenue offers a high-level view into whether or not they’re growing.
Net income: this is a company’s profits after subtracting production expenses, debt payments, and taxes.
Earnings per share (EPS) : EPS is a company’s profit divided by its number of shares that are available for sale.
Price-earnings (P/E) ratio : this is used to determine the market value of a stock compared to the company’s earnings.

In addition to analyzing earnings reports, also consider non-numerical information like company press releases, recent company news, and annual letters to shareholders.

3. Determine how much you can invest

Determining how much you can invest depends on your financial situation and investment goals. You might start small by purchasing a single share in a company—or with fractional shares, if your brokerage offers them. If you don’t have an emergency fund established, it’s smart to build that up before investing in stocks.

4. Pick a stock order type and place your trade

If you’re using a robo-advisor, you won’t need to worry about this step. Otherwise, you’ll likely need to place the order yourself. To do so, you’ll need to specify an order type: a market order or limit order.

Market order: instructs your broker to buy the stock immediately at the current best available price.
Limit order: allows investors to set a maximum acceptable purchase price, meaning the trade will only be executed at the specified price or better.

5. Optimize your stock portfolio and build wealth over time

Investing in stocks isn’t a set-it-and-forget-it process. Periodically check in on your investments and continue to stay aware of the company’s performance—consider setting aside time each quarter to review quarterly earnings reports and balance sheets.

FAQs about how to buy stocks

How can I buy stocks online without a broker?

You don’t have to work directly with an actual broker—online brokerages can facilitate your stock purchases.

How much money do I need to buy stocks?

Technically, there’s no minimum amount required to buy stocks. Many online brokerages allow you to start investing with no account minimums or transaction fees.

Is now a good time to buy stocks?

For long-term investors, the best time to buy stocks is as soon as possible.

Are stocks and shares the same thing?

While stocks and shares are often used interchangeably, they’re technically different.