Very few barriers stand in the way to setting up your own stock trading account and making trades online yourself.
More online brokers are available than ever to choose from and the costs of trading stocks have essentially disappeared.
While buying and selling stocks online can seem intimidating at first, it’s a straightforward process you can complete in just a few steps.
Selecting the right online broker is a the first step when buying stocks online. With numerous options available, it’s essential to consider factors such as fees, trading tools, research resources and customer service.
Here are some key considerations to guide your decision:
By carefully evaluating these factors and comparing different brokers, you can choose a reliable and reputable online broker that meets your trading needs and preferences. Once you’ve selected a broker, you can proceed to open an account and start buying stocks online.
Opening an account with an online trading platform is painless and usually takes just a few minutes.
While the exact format will vary from broker to broker, it must adhere to Know Your Client (KYC) standards: you must provide personal information to verify your identity and answer a handful of questions about your background, investing experience and goals.
This lets brokers and financial insitutions verify the identity and other credentials of customers to prevent money laundering and terrorism financing.
When you apply for a brokerage account, you take part in the KYC process. Personal information you can expect to provide include:
Most brokers use an automatic KYC process, which means your application will often be approved instantly or within a few minutes. If a broker is unable to verify your information, you may be asked to submit proof of ID.
Funding your account
While you can open an account with most brokers without a minimum deposit, you can’t trade until you have sufficient funds in your account to cover the cost of the transaction.
One of the easiest ways to do this is to link your bank account and transfer funds electronically via the Automated Clearing House (ACH) network. ACH transfers take between one to three business days to complete, but some brokers offer a feature called “instant deposits” or “instant buying power,” which lets you trade up to a certain amount before the funds have settled.
Other funding methods include wire transfer, check deposit and ACATS transfers from other brokers. Credit cards are typically not permitted as a brokerage account funding method.
Matt's tip on signing up with a broker
You are not confined to just one broker. If you're between two investing platforms and can't decide, open an account with both! This will not only let you take advantage of multiple sign-up bonuses (if available) but will also let you enjoy the benefits and features each broker has to offer.
— Matt Miczulski, Editor, Investments.
Start is with an industry that interests you, and then explore the different companies in that space. Identify the industry’s biggest companies and key players, along with young companies with potential for growth.
But also figure out which companies are falling, or have fallen, out of favor. If you want to follow a Warren Buffett saying, “never invest in a business you cannot understand.”
Tools like stock screeners can help you narrow down stocks by sector, industry, price range and more. Search for companies by name or ticker symbol, and use watchlists to track potential investment opportunities.
Analyst research reports can give you valuable insight into companies and guidance as to whether a particular company may be a good investment at this time.
At the end of the day, you should perform as much in-depth research as possible until you’re comfortable investing.
With a stock in mind and funding in place, it’s time to invest. But before you invest, you should know how much money you want to invest in any particular stock or how many shares you’d like to buy.
Consider your budget, investment goals and your overall portfolio allocation.
With the advent of fractional share trading, you no longer need to pay the entire share price to invest. Fractional shares lets you invest much smaller dollar amounts in a stock — $1 with many brokers — instead of having to buy whole shares. Not every broker offers this feature though.
Brokers that offer fractional share trading include SoFi Invest, Robinhood, Charles Schwab and Fidelity Investments.
Types of stock orders
There are two main ways to buy stocks online: placing a market order or placing a conditional order.
Once you’ve entered your transaction specifics, including the type of order you’d like to execute and the number of shares you’d like to purchase, submit the order.
Dollar-cost averaging
Dollar-cost averaging is a strategy investors use to mitigate the impact of market volatility when buying stocks online. Instead of investing a large sum of money all at once, investors gradually purchase stocks over time, typically at regular intervals.
For instance, let’s say you have $1,000 to invest in a particular stock. Instead of investing the entire $1,000 at once, you dollar-cost average by investing $100 every month for 10 months. Over the 10-month period, you’ve invested a total of $1,000 and accumulated shares at various prices — some low, some high.
This approach of consistently investing fixed amounts over time can help smooth out the impact of market volatility and can potentially lead to better long-term returns.
If you want to buy stocks online but would rather outsource portfolio management than do it yourself, then a robo-advisor might be an option.
Robo-advisors use algorithms to automatically invest in ETFs of stocks and bonds according to your investing experience, risk tolerance and timeline.
This passive investing approach can save you time and worry, as you don’t need to research stocks and can take the emotion out of investing and managing your portfolio.
The cost to buy stocks depends on each specific trading platform.
Some online brokerages like Robinhood and Public charge no commissions to trade stocks while others require a minimum deposit just to open a trading account.
Before Robinhood pioneered commission-free stock trading, brokers charged anywhere from $5-to-$10 per trade.
But the overall cost to buy stocks online will include both trading costs and account fees. The best online trading apps charge no commissions and the fewest miscellaneous fees.
Once the broker executes your order, you’re a shareholder. Now just follow your investing plan.
The typical buy-and-hold investor holds on to stocks in the hopes that the shares will eventually increase in value. They may hold a stock for months or years before they decide to sell it — hopefully at a profit.
Active traders, on the other hand, may offload a stock quickly.
Specifically, day traders engage in intraday trading, which involves buying and selling a stock over a single trading day. The aim here is to take advantage of sudden changes in a stock’s price.
This type of trading is complex, fast-paced and requires a comprehensive understanding of the market. It’s not a suitable trading strategy for beginners.
Ultimately, what you do with the assets in your portfolio depends on your investment goals, strategy and risk tolerance. Make sure to check in occasionally on your investments to track their performance and ensure your portfolio still aligns with your investment goals.
The process of selling your stocks is equally as important as buying them. But not every investor follows the same playbook.
Some experts say you should consider selling your stocks if the company’s fundamentals change for the worse or if the competitive landscape changes. For instance, you may decide to sell your stock in a company whose earnings continue to steadily decrease or whose performance has dramatically weakened compared to industry peers.
Another reason to sell might be that you need the money for a more attractive investment.
In an ideal situation, investors want to sell at the point in time in which it will be most profitable. But timing the market is incredibly difficult, if not impossible, and can be costly. This is why it’s important to develop a strategy and stick to it.
It’s generally safe to buy stocks online.
Most online trading platforms employ safety measures like 24/7 infrastructure monitoring and two-factor authentication as standard protocols. Many also maintain a membership or good standing with the US Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC).
But, like with anything on the internet, there are still some things to watch out for:
You need a broker to buy most stocks online, though some companies offer direct stock purchase plans.
For instance, stock transfer company, Computershare, lets you new and existing shareholders purchase stocks in companies like Nike (NKE), Coca-Cola (KO) and Walmart (WMT) directly without a broker.
Here’s how to buy stocks online without a broker using Computershare:
Compare brokers by available asset types, minimum deposit, stock trade fee and more. Select Go to site to sign up for an account or select More Info to read our comprehensive review.
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Buying stocks online is simple and quick and can be done from anywhere with an internet connection. Look at investment options, fees and features when comparing brokers to narrow down your search. You may ultimately need to open an account with several brokers to see which is right for you.
The process to start buying stocks online is quite simple and starts with opening an account with a brokerage. With an active account, research and choose the stocks you want to buy, fund your account and place your order.
All types of stocks are available online, but the access to those stocks will depend on the asset types your broker offers. For instance, US exchange-listed stocks from popular indices like the S&P 500 are available on most platforms, but not every broker offers access to over-the-counter and penny stocks or, say, foreign-listed stocks.
Beginners can start buying stocks online by setting up an investment account with a brokerage firm. Brokers that offer fractional share trading let you invest with as little as $1 or $5.
Yes, you can absolutely buy stocks with $100. As of August 3, 2023, at least 227 S&P 500-listed stocks traded for under $100, according to Finviz data. With fractional share trading, you can buy slices of stocks often for as little as $1.
You can change market orders any time prior to submission. Once executed, you cannot reverse a market order. Investors can change or cancel standing orders, such as a limit order, any time before the order has been filled.
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