How to Invest in Stocks Online – Have you ever decided to start investing in stocks? If so, you may have had some questions about how to start. If you are looking for information on what to do before placing your first stock trade, this is the article for you…I’ll show you how I invest my hard earned money, what steps I take to know if a company is undervalued, and give some great resources to help learn more about the stock market.
If you’ve been looking for a solid, foolproof way to invest in stocks, look no further. You don’t have to be a Wall Street whiz to get in on the action! By taking some time to learn some basic investing strategies you can have an investment portfolio that grows over time no matter what the economy is doing. In just a few minutes you can start learning how to invest in stocks. I’m going to show you how it’s done.
Table of Contents
Open a brokerage account
In order to invest online in individual stocks, you’ll need to open a brokerage account at one of several brokers such as Fidelity, Schwab, or Webull. The process of opening an account is fairly straightforward and shouldn’t take much more than a few minutes. You’ll need to provide basic information about yourself and any other people on the account.
Fund the account
The next step is to actually put money into your account so that you have funds to invest. This can be done by sending a physical check through the mail, but it’s much more convenient to set up an electronic transfer. To transfer funds electronically, you’ll provide the account information and the financial institution where you’d like to transfer money from. Your money should arrive in your account within a few days.
Research stocks you’re interested in
Before buying any stock, you’ll want to do some research on the companies you’re considering. Make sure to read the company’s annual report, or 10-K filing with the Securities and Exchange Commission (SEC), as well as the most recent quarterly reports to get a better understanding of the business and how it’s performing.
Before you make a purchase, you should be able to explain how a company makes money, its position relative to competitors, and what you think the next three to five years are likely to look like for the business. Be sure to pay attention to valuation, or what you’re paying compared to what you’re getting as a shareholder.
Place a trade order
Once you’ve zeroed in on a stock to buy, you will need to place a trade order. You will likely have a few different options when placing a trade. Here are the two most common types:
- Market order: A market order means your trade will be executed immediately at the best available price. This type of order puts no price parameters around the order, so the price you ultimately pay may be higher or lower than the most recent quote. Market orders are best used for highly liquid companies that trade lots of shares each day because your order is unlikely to move the stock price in one direction or another.
- Limit order: This order type will execute your trade only at a specific share price or better. For example, if you place a limit buy order at $10.00, the trade won’t go through unless someone is willing to sell at $10.00 or lower. This gives you more certainty about the price you’re paying going into the trade, but you’ll run the risk that the price never reaches your limit. Limit orders are good for stocks that don’t trade very many shares and where your order might influence the share price. This would typically occur with small or micro-capitalization stocks. Limit orders are also useful for stocks with wide bid/ask spreads or high volatility.
You will also face choices on how long you want the trade order to be valid for and whether you want the order to be “all or none,” which means the order won’t be filled unless you can purchase all the shares you’ve asked for. Orders are valid for the rest of the trading day or are “good till cancelled,” meaning the order will usually stand open for 60-90 days or until it’s filled.
Is it safe to buy stocks online?
Yes, it is safe to buy and sell stocks online as long as you’re using a reputable broker. You even have some protection in the event that the brokerage firm fails thanks to the Securities Investor Protection Corporation (SIPC). The SIPC was created in 1970 and protects customers at SIPC-member brokers for up to $500,000 in all accounts at a firm, including a maximum of $250,000 for uninvested cash.
Where can you buy stocks online for free?
You can buy stocks without paying commissions at most online brokers these days. Charles Schwab, E-Trade and Robinhood all offer commission-free trading in stocks as well as ETFs. Robinhood even offers commission-free trades in options and cryptocurrencies.
Can you buy stocks online without a broker?
Opening an account with an online broker is going to be the easiest path to online investing. Some companies allow investors to purchase shares directly from them and participate in dividend-reinvestment plans, but online brokers are a good choice for most people. They offer easy-to-use platforms and commission-free trading. Signing up for a new account should only take a few minutes.
What do you need to buy stocks online?
Fortunately, not too much. You’ll need a brokerage account with an online broker, which can be opened in just a few minutes with some basic personal information, as well as a way to fund your account. Funds can be deposited by check or through an electronic transfer.
What stocks should and shouldn’t be traded online?
If you understand the business of the company you’re buying, almost no stocks are off-limits for online trading. Dividend stocks, tech stocks, and everything in between are all available to trade online. You can even trade options online, but most brokers still charge a small fee for that. Make sure to do your research before making the plunge, otherwise you’re just speculating. However, penny stocks, which the SEC defines as stocks that sell for less than $5 per share, should be viewed with caution because they can be particularly volatile and are ripe for manipulation.
How much money do you need to buy stocks online?
Not very much. Most online brokerages don’t have minimum requirements to open an account and through the trading of fractional shares, investors can now buy into their favorite companies for as little as $5. With many of today’s leading companies’ shares selling for hundreds or thousands of dollars, some brokers offer investors the chance to buy a portion of a share for just a few dollars.
What are the different types of online stock brokers?
There are two main types of online stock brokers: discount and full-service. They each come with distinct costs and levels of service.
Discount broker
A discount broker, also known as an online discount broker, is a company that lets an investor buy and sell securities online. As a customer, you can direct the process of buying and selling stocks or sign up for an account with a robo-advisor that’ll automate your investments. Many discount brokers have features that help you decide how to direct your trades, but typically there’s no human broker taking and filling your orders.
True to their name, discount brokers are much cheaper than full-service brokers, and most offer zero-commission stock trading. For the vast majority of investors — especially the beginning investor — a discount broker is the best choice. That’s why our picks for the best trading platform for beginners are exclusively discount brokers.
Full-service broker
Think of a full-service broker as an old-school broker. It’s a firm that usually operates out of a physical office where an actual person, also called a stock broker, takes and executes clients’ buy and sell orders. A full-service broker might also provide personalized investment planning services, such as stock-buying advice, tax guidance, and retirement planning help.
Full-service brokers are far more expensive than discount brokers, given the costs of human advisors and brick-and-mortar locations. But costs have generally come down over the past few decades as they face competition from online brokers, aim to make investing more accessible, and gain access to tools to automate work on their end.
Full-service brokers are best suited to high-net-worth investors who want a personal level of service and dedicated investment portfolio management.
Conclusion
There are few better feelings than checking your brokerage account and realizing it’s grown even more in value. Unfortunately, these feelings are never realized by millions of people who don’t know where to start when it comes to making money with stocks.