The thought of the stock market can initially be a dizzying—not to mention intimidating—one. Images of zigzagging graphs, fluctuating numbers, and buzzwords like "crash" can be enough to shun it altogether. While it's true that there's an aspect of chance with stocks, it's possible to take part in the stock market with more dependability than previously assumed. Don't let the idea of the stock market overwhelm you—the process is more intuitive than you think, and the steps are simple. While you're going through your first purchases, don't feel pressured to bite off more than you can chew.
Buy in small quantities with low-risk stocks at established companies. Get your feet wet before delving into more experimental investments. We're here to teach you how to take those very first actions to get you started. Keep reading to learn how to buy stocks in four easy steps.
Create a Brokerage Account
Before you do anything, you'll need to open a brokerage account. Investors purchase stock through brokers, and opening an account allows you to buy and sell stocks through a broker either online or in-person. This is where sites like Ameritrade and E*Trade come into play. These two examples are online only, so if you're looking for in-person advice, you may want to opt for a firm like Charles Schwab. When choosing an account, keep in mind the amount of money you'd like to invest and how frequently you plan to trade.
Most online accounts offer incentives, like a $0 minimum to get started, while in-person accounts can range from a no minimum charge to $2000 minimum. Keep in mind that with trading comes commission costs for the brokers. This is a price you'll want to pay special attention to if you plan to trade frequently.
Choose Your Stocks
Now that you have an account set up, it's time for the fun part: choosing your stocks. This may seem like an overwhelming step at first, but using your own experiences as a consumer can help guide you. Remember that when you purchase stocks, you're becoming part owner. Think about the companies you'd want to have a stake in. If it's a company that you enjoy as a consumer—whether it's due to innovative products or great customer service—you're likely not the only one who feels this way. A company you feel safe purchasing with is a good indicator of a company you can feel safe investing in.
Select the Number of Shares
Once you know which company you'd like to invest in, you'll have to determine how much stock you'd like to buy. Of course, this will depend largely on how much you're willing to invest. There's no shame in buying minimal stock. In fact, if this is your first time purchasing, you may want to invest in a single share to begin. This will give you a good indicator of what it's like to ride the highs and lows of owning stock.
Make Your Order
Once you're ready to make your order, you'll have to consider two options: a market order or limit order. A market order allows you to buy immediately at the existing market price. A limit order allows you to set a price that you'd like to purchase stock at. Once stock reaches your preferred price, your broker will invest in the stock on your behalf. Of course, with a limit order there's no guarantee that stock will ever reach your desired price. However, this is a good option if you're planning to invest in a smaller company with a more volatile stock price.
If you're more interested in "buy and hold" stocks, stocks that you plan to hold onto for an extended period, chances are you're investing in a more established company where price fluctuations are relatively static. In this case, a market order is typically a better option as it ensures that the purchase is made.
Up next, learn how to save $1000 in two months with our money-saving challenge.