How to Buy Stocks

Apr 28, 2022


The process of buying stocks isn’t as complex as it appears. However, you’ll need to conduct some research and master the terminology before investing for the first time.

You’ll require an account at a brokerage that you can establish in around 15 minutes to purchase stocks. After you’ve added funds to your account, follow the steps listed below to identify the best companies to invest in, and then choose specific companies.

How to Buy Stocks

It can be difficult at first, but purchasing stocks is actually pretty simple. These are 5 steps to help buy your first stock:

How to Buy stocks in 5 Steps

1. Select an online stockbroker.

The most efficient method to purchase stocks is via an online broker. After you have opened and funded your account, you can buy stocks on the broker’s website in just a time of just a few minutes. Another option is to use an all-inclusive stockbroker or buy stocks straight from the firm.


The process of opening an online brokerage account can be as simple as opening your bank account: fill out an application for the account and provide proof of identity and select whether you would like to fund the account via making a transfer of a check or by mailing the funds via electronic transfer.

2. Study the stocks you wish to purchase.

After you’ve created and topped up the brokerage account you have, you’re now ready to get into the business of choosing stocks. The best place to begin is to look up companies you’ve already heard of through your experience as a buyer.

Don’t let the flood of information and live market fluctuations overwhelm you when you do your investigation. Make your goal clear. It’s about finding companies that you’d like to become a shareholder.

Read Also: How to Research Stocks


Warren Buffett famously said, “Buy into a company to own it, not because you want the price to rise.” He’s been pretty successful for himself by adhering to this rule.

Once you’ve identified these businesses, then it’s time to conduct some research. Begin with the annual report, specifically the annual letter from management to shareholders. The letter will provide an overview of the state of the business and give some context for the numbers in the document.

Following that, most of the information and tools needed to assess the company are available on your broker’s website, including SEC filings and conference call transcripts, quarterly earnings updates, and the latest news. Many online brokers provide instructions on how to use their tools and even basic classes on how to select stocks.

3. Determine the number of shares you want to purchase.

Paper trading is a great way to learn to purchase and sell stocks with playing money. There should be no obligation to buy a specific amount of shares or fill your entire portfolio with stock at the same time. Start by experimenting with the basics of trading on paper, using an online stock market simulator to begin to learn. If you’re ready to invest real money, you can start by buying a very small amount. You could buy just one share to get an idea of the experience it’s like owning individual stocks and whether you’re prepared to endure the tough times with no sleep loss. It is possible to increase your portfolio when you’ve mastered the art of swaggering shareholders.

Investors who are just beginning to get into stocks may be interested in fractional shares, a new option by online brokers that permits investors to purchase a fraction of a share instead of the entire share. The result is that you can invest in expensive stocks with less money. SoFi Active Investing, Robinhood, and Charles Schwab are among the brokers offering fractional shares.


Many brokerages have tools that allow you to convert dollars into shares, as well. This can be useful when you have a specific amount that you’d like to invest, like $500, and you want to determine how many shares this amount can purchase.

4. Choose your stock order type

Don’t be deceived by the plethora of numbers and confusing terms on the broker’s online page for orders. Check out this cheat sheet that outlines the most important terminology for trading stocks:



For buyers: the amount that Sellers are willing to pay for their stock.


For sellers: the price buyers will pay for the stock.


The gap between the offered price and also the lowest asking price.

Market order

The request is to purchase or sell shares ASAP at the most competitive price.

Limit order

The request is to purchase or sell a stock at a specified price or higher.

Stop (or stop-loss) order

When a stock is at an amount, or a price, known as”stop price” or “stop price” or “top-level,” the market order is issued, and the entire market order will be filled with the current price.

Stop-limit order

Once the stop price is reached, the trade becomes an order to limit the trade and is full to the point that the specific price limits can be reached.

There are many more sophisticated trading strategies and types of orders. Investors have made a career by buying stocks with just two kinds of orders that include markets orders and limit orders. It’s not worth the effort right now or perhaps never.

Market orders

When you place a market order, you’re saying that you’ll purchase or sell the shares at the value on the market. Since a market order places no price specifications on the transaction, the order is completed immediately and completely filled except if you’re trying to purchase one million shares and then attempt a takeover attempt.

Don’t be shocked if you find that the amount you pay or receive if you’re selling your property is not the same price as you were quoted moments prior. Market orders are the reason why. The prices for bid and ask vary frequently during the day. It is a good option for buying stocks that don’t have huge price swings. These are big, steady blue-chip companies against smaller, less volatile companies.

It is important to be aware of:

  • Market orders are the best choice for those who invest in buy-and-hold and believe that small variations in price aren’t as important as making sure that the transaction is properly executed.
  • If you submit an order for market trading “after time,” after the market is closed for the day, you will have your trade executed at the current price when the exchanges are next opened for trading.
  • Check your broker’s trade execution disclaimer. Some brokers that are low-cost combine all trade requests from customers to be executed all at once at the price that is currently in effect in the event of the close of the day’s trading or an exact time or day during the week.

Limit orders

Limit orders give you greater flexibility over prices at which your trade will be executed. If XYZ shares are trading at $100 per share and you feel that it will be more in keeping with the way you feel about the company, your limit order will tell your broker to stay firm and to execute your order only when the price of the offer drops to the same price. On the other hand, the limit order instructs your broker to sell shares after the bid increases to the price you have set.

Limit orders are a great instrument for investors who are buying and selling stocks of smaller companies and tend to see greater spreads, contingent on the activities of investors. They are also a good investment during short-term stock market volatility or when the price of stocks can be more significant than the fulfillment of orders.

You can add other conditions to the limit order to limit how long the limit order can remain open. An “all or nothing” (AON) purchase is only executed when all the shares you intend to trade are in stock at the price you have set. A “good for the day” (GFD) purchase will expire at the conclusion of the day’s trading, even if the request is not fully filled. A “good until canceled” (GTC) request is in place until the buyer decides to cancel the order or the order is canceled, which could take between 60 and 120 or longer.

It is important to be aware of:

  • While a limit order guarantees the amount you’ll pay when the order is fulfilled, there’s no guarantee your order can be completed completely, in part, or in any way. Limit orders are made on a first-come, first-served basis. They are only placed when market orders have been filled and only if the stocks remain within your specified limits long enough to allow the broker to process the transaction.
  • Limit orders may result in higher commissions for investors over market-based orders. Limit orders that cannot be completed in full in one go or on one trading day could continue to be filled on successive days, which means that transaction costs are charged every day that a trade is executed. If the stock price does not reach the amount of your limit order at the time it expires, the transaction cannot be completed.

5. Optimize your stock portfolio.

We hope that your first stock purchase marks the beginning of your lifelong experience of investing successfully. However, if the going gets tough, be aware that everyone goes through rough times, including Warren Buffett. The most important thing to stay ahead over the long run is to maintain a positive outlook and keep your focus on things you can influence. Market fluctuations aren’t among them. However, there are some things you can control.

Once you’re comfortable with the buying process for stocks, It’s time to explore different areas of the world of investing. How can mutual funds be a factor in your investment strategy? Apart from having a brokerage account, have you created an account for retirement, like an IRA? Setting up a brokerage account and investing in stocks is an excellent start; however, it’s only an initial step in your journey to investing.

Frequently Asked Questions on how to buy skocks

There are no single “best stocks,” which is why numerous financial advisors recommend using low-cost index funds. If you’d like to include a few different options in your investment portfolio, novice investors might consider blue-chip stocks from the S&P 500. They’re among the country’s most stable businesses with a proven history of providing long-term gains for investors.

2. Is this an ideal time to invest in shares?

In reality, you won’t know the best moment to invest in stocks. If you’re investing over a long time frame (say over five years), the best time to purchase stocks may be when you’ve got the cash available. If the market does fall shortly after you invest in the market, you’ll have ample time to recover the losses. The only way to be sure you’ll participate in any recovery or expansion right from start to finish is to invest before the time when the recovery begins.

3. What amount of money will I need to purchase stocks?

If you sign up for an account at a brokerage company that doesn’t have a limit on the amount of money you can deposit and with no transaction costs, you can begin investing with just enough money to purchase a single share. Based on the company, the share price could be less than 10 dollars (though be aware that low-cost stocks do not necessarily mean they are good investments). ).

Some brokerages allow the purchase of fractional shares. That means that if you had only 100 dollars in your account, you can purchase part of a company such as Google that has traded at over $1,000 per share. Of course, the more you invest in the future, the greater the potential return over the long run.

4. How can I buy shares on the internet without an agent?

The advent of online brokerages has made it simple for novices to sign up and utilize their services in recent times. Having an account with a brokerage online is the best way to enter the stocks market for many new investors.

If you’re looking to begin investing with no broker, look for companies offering an option to purchase shares directly from the company, which allows you to purchase shares straight from the business for the cost of a small or none. The plans could also benefit from investing in the amount in dollars instead of per share and frequently allow investors to create recurring investments within a set time.

Another method of buying stocks without broker involvement is to use the dividend reinvestment program that allows investors to immediately reinvest dividends back into the stock instead of taking dividends in the form of income. Like direct stock plans, you’ll have to search for the firms that offer these programs.

5. Are shares and stocks identical?

Most of the time, it is true. The possession of “stock” as well as holding “shares” both indicate that you own a stake (or equity)of a business. You’ll generally find “shares,” meaning the amount of ownership stakes within a specific company. However, “stock” usually refers to equity in general. As an example, you may hear investors saying, “I bought 10 shares of Apple,” or “I have shares of Apple, Facebook, and Amazon .”

6. Which are low-cost stocks to purchase now?

It’s important to keep in mind that the price of a share doesn’t provide all the information you’ll know about the company you’re looking to invest in. Price is a reflection of how much investors are willing to pay or sell the stock and not the actual worth of the company or the direction the stock price of the company is heading. Simply because a stock is “cheap” does not mean it’s an investment worth it.

However, there are strategies to identify stocks that are undervalued. This approach helps investors recognize reliable companies with price levels that could be less than the stock’s value due to other external causes, for example, a slump in the market for stocks in general.

7. What number of shares do I need to purchase?

The amount of shares you purchase depends on the amount you’re looking to invest. If the price of a share of $50 is $500 and there’s $500 looking to invest, you might be able to buy 10 shares. If the cost of the stock of $51 is the same as if you only have 500 dollars to put in, then you’ll be able to buy nine shares. 10 shares will cost you $510. You’ll have to round them down if your brokerage doesn’t permit fractional trading and your figures aren’t exactly pure.

8. How do I know when to sell stock?

If you’re buying stocks, you must be content not touching your cash for at least five years. This is due to the stock market’s fluctuation — the worth of your stock could decrease before rising. It’s possible to sell your shares if you require cash and they’ve increased in value. However, doing this means that you’ll be required to pay capital gains tax upon the sale and miss out on future gains as time passes.

It is perhaps more important to think about when to sell your stocks. You might be tempted to sell your stock when the market is soaring to avoid more losses. It is widely acknowledged as a wrong choice because once you’ve sold, you’ll be able to lock in the losses you’ve suffered. Better to stay out of the market’s risk and seek long-term gains, knowing that market prices will rebound in time.