How to Buy Stocks Online: Diversify for Cheap

When people buy stocks online, they usually know that they should be buying a diverse portfolio of stocks; however, because of the pricing structure of their online stock broker, they can not afford to make online stock purchases in as many different companies as they would like to.

Normally, when people buy stocks online, they are forced to pay a commission for the shares of each company they would buy, so even if you have an online stock broker that charges $7 per trade, if you wanted to buy stock in 30 different companies, it would cost you $210 in commissions to your online stock broker. If you want to add to your positions every month, it will cost you $210 per month, or $2520 per year!

Luckily there is a new breed of online stock brokers that are set up to allow regular people to buy stock in many companies for a small amount of money.

Difficulty: Easy

Instructions

1. 
    

   To buy stocks online in a lot of companies for cheap, you need to find an online stock broker that allows "portfolio trading." Usually, this means that you pay a small yearly fee to make as many online stock trades as you'd like. I use a site called folioinvesting.com to make this type of online stock purchases.

2. Basically, you pick a group of 25 or 30 stocks and the online stock brokerage buys shares in each of these companies for you in one transaction instead of 25 or 30 smaller online stock purchases. And there is no extra commission, because you have already paid the small yearly fee.

3. 
    

   This is a great way to purchase stocks online because you can make up to 200 purchases per month for pennies apiece. At a normal discount online stock brokerage, you would be paying over $1,400 per month to make that many trades. Since the stock market is low, now could be a great time to buy stocks on line, before the market goes back up. If you are diversified, it will help to make sure that you are not betting all of your money on one bad stock!

[rjspindle]

on 3/1/2009 Great tips and article. You're pretty consistent. Keep it up. 5*

[kiwi7]

on 2/28/2009 Great tips. I'm excited about learning more about trading stocks. Thanks!

[ledzippel]

on 2/26/2009 I really wish I read your articles when the stock market wasn't so violent. 5*

[bulletbutter]

on 2/19/2009 I've always wanted to learn how things with the stock market works, thanks for the info.

[tundranut]

on 2/17/2009 Really nice. Great tip and I learned something. 5 stars and a recommend.