How to Buy Stocks for the First Time

New stock investors should learn as much as possible before buying that first stock.

There are different paths to get investment exposure to the stock market. Mutual funds and exchange-traded funds (ETFs) are packaged products allowing investors to buy into a portfolio of stocks with one investment. Investing in individual stocks is usually accomplished through an account with a stock broker. Discount, online brokerage accounts allow investors to buy stocks with low commission costs.

Instructions

1. Select an online discount broker for your stock account. Compare the commission rates and services of several brokers. SmartMoney magazine publishes an annual survey of online brokers and rates them by fees, customer service and services (see Resources).

2. Complete the online account application and fund the account using one of the methods allowed by the broker. Most online brokers accept money by wire transfer, electronic bank transfer or mailed check. Follow the broker's directions for sending in money.

3. Use the broker's online research resources to find stocks that meet your investment goals. The critical part of stock investing is stock selection. Do not start buying shares until you are comfortable with the reasons you want to buy a stock.

4. Look up the current share price of a stock in which you want to invest. The broker's web pages will have a place to enter stock symbols to get the current share price. All stocks have a one- to five-letter stock symbol, and using a stock symbol is the quickest way to look up a share price.

5. Buy shares of stock using the stock order or trade screen on the broker website. You can get to the trade screen by clicking the link next to a share price you called up. In the order screen you will enter the number of shares you want to buy and place the order. A market order will buy the shares at the current market price. You can use a limit order if you want to buy shares when the stock reaches a certain level.

Tips & Warnings

• There are thousands of stocks and many investing and trading styles or strategies. Study and research into the stock market will help you understand how to select stocks for investment.

• Blue-chip stocks of well known companies are a good place to start stock investing. Think about companies whose products or stores you see everywhere and research those stocks.

• The standard stock purchase is in increments of 100 shares. However, you can enter purchase orders in any number of whole shares.

• The share price of a stock will go up and down over time. Good stock investments go up and a poor choice can lose money. No investor is right all the time and some of your stock investments will be losers. It is important to do your own research and understand the risks before buying any stocks.

References

• SEC: Accounts - Opening a Brokerage Account
• Get Rich Slowly; What to Consider When Opening Your First Brokerage Account; J.D. Roth; Jan. 10, 2008

Resources

• Read this Article in Spanish
• SmartMoney; The 2011 Broker Survey: Who Tops the List?; May 6, 2011