How To Buy Stocks – Beginners Guide

By Adam Jusko, ProudMoney.com, [email protected]om

If you’re a beginner to the world of stock buying and selling, this guide will help you get started. This is NOT a guide for how to pick stocks. Which stocks to buy, but instead the basics of how to set up a stock trading account if you’re a beginner.

Step 1: Select an Online Broker

In order to buy and sell stocks? also known as “stock trading”? you will have to have an account with an online broker. “Online broker” sounds sort of intimidating and mysterious? but an online broker is just an online trading platform — it’s a company’s website (or mobile app) where you go to buy and sell stocks? and also to see your current stock holdings, deposit money for trading, etc. You have probably heard some of these brokerages’ names before, even if you’re not sure how they work — Charles Schwab, E-Trade, Robinhood, Fidelity, TD Ameritrade, etc. All of these will let you set up an account for free, and once you’ve done the next step below, you’ll be ready to buy stocks.

Step 2: Fund Your Account

If you’re going to buy stock, you’ll need money in your account. There will be an option to add money, regardless of which online stock broker you choose. In most cases, you’ll give information about your bank account (account number and bank routing number) and how much money you’d like to transfer to the broker’s platform. Here’s how that looks on E-Trade:

After you have approved the transfer, it may take several days before the money transfers from your bank to your new broker account. Once it does, you’ll be ready to buy stocks!




Step 3: Search Stocks to Buy

You may already have some ideas of companies whose stock you’d like to own. You might be interested in buying stock in Apple, Facebook, Tesla, Amazon, or Nike. You can search for the ticker symbol of the company you wish to purchase stock in, such as AAPL or TSLA for Apple.

To make that purchase, most brokers/platforms will have a “Trading” tab or link. This is the place you should go. Once you do, you’ll usually see a screen that looks something like this:

 

The key things you’ll want to know to complete your stock purchase:

  • Symbol – The abbreviation for the company you are buying. For example, AAPL is Apple’s symbol.
  • Act Now – Buy or Sell. For your interest in buying stock, you would of course choose “Buy”.
  • Quantity – How many shares of stock do you want to buy? How many shares of stock will you purchase if AAPL (Apple), is $150 per share?
  • Type of price – As a beginner, you will want to choose “Market”. You may be able to place Stop and Limit orders to buy, as well as stop orders to sell in the future. A “Market” order means you are buying at the current price. You should be aware that prices are subject to rapid change and you may not get the best price. Think you are buying at might be slightly different than the “market” price when your order is actually filled. You might be able to sell the $150 AAPL share at $115.06 pershare instead. This is because the price was changed as you were making your order.
  • Durability – Your market order is generally going to be “Good for Day”, meaning that the broker will attempt to buy the quantity of shares you want before the stock market closes for the day. If that doesn’t happen, which is somewhat rare, your order will be canceled and you’d have to try again the next day that the market is open. (The stock exchange is open from Monday to Friday, except on holidays.

NOTE:You may find some stocks very expensive per share. Online brokers can allow you to buy fractional shares. This is a smaller amount than buying a full-sized share. For example, if a stock is trading at $1800 per share and you only have $900 in your account, you can’t afford a full share. However, if an online broker allows you to buy fractional shares you could be able to buy half of that $1800 stock.

Individual Stocks Vs. ETFs Vs. Mutual Funds

You may be familiar with stocks from individual companies such as Apple or Tesla. However, mutual funds and ETFs are not something you’re likely to know much about. An ETF or mutual fund is like a “basket of stocks” all rolled into one, and when you purchase the ETF, you are actually buying a little piece of all of the stocks within that basket. This allows you to diversify your investments by investing a small amount in many different companies (through an ETF or mutual funds) and thus reduces the risk of losing large amounts of money at once. ETFs and mutual funds usually have a “theme”, meaning that there is something similar about all of the stocks in the fund, such as all the stocks being part of a big stock index like the S&P 500 or maybe being all airline stocks or all technology stocks, etc. ETFs or mutual funds are a great option for stock traders who have less capital to invest. They can buy shares in multiple companies and not need to purchase them individually.

Enjoy the moment, but be careful

Investing in stocks and ETFs and mutual funds can be very enjoyable (especially when the stock prices rise and your money increases), but you also can lose a lot of money very quickly if you don’t have a good reason to buy the stocks you are buying, or if you get antsy as soon as the price goes down and you sell too soon. It’s difficult for many new investors to be patient once they’ve made a stock purchase, so you may want to start small and see if you can stomach the ups and downs in the market before committing too much of your hard-earned money.



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