How to Buy Stocks Online: A Guide to Placing Your First Trade
Buying stocks may seem complex, but it's as easy as opening a brokerage account online and then purchasing stocks of the companies you're interested in.
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Updated · 5 min read
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Gone are the days when you had to call someone on Wall Street to place a trade. Today, you could purchase a stock in as few as five clicks through an investing app on your phone or computer.
How to buy stocks
1. Choose a broker and fund your account
To start buying stocks, you'll first need to figure out which broker you want to open an account with. Some brokers, like Fidelity, are famous for their many years in business and 24/7 customer support. Others, like Robinhood, are known for their easy-to-use platforms and apps.
You'll want to evaluate brokers based on factors such as costs, investment selection, investor research, tools and access to customer service. Maybe you'll want to open a brokerage account where you already have a bank account, which can help you see all your finances in one place.
No matter which broker you choose, the process of opening an account is fairly similar — it takes about 15 minutes and requires some personal information. After that, you can transfer money from your bank account into your new brokerage account.
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2. Research stocks before you buy
Once you’ve set up and funded your investment account, it’s time to dive into the business of picking stocks. A good place to start is to research companies you already know from your consumer experiences by looking up their ticker symbols in your brokerage account.
Don’t let the deluge of data and real-time market changes overwhelm you as you conduct your research. Keep the objective simple: You’re looking for companies in which you want to become a part owner.
Warren Buffett famously said, “Buy into a company because you want to own it, not because you want the stock to go up.” He’s done pretty well for himself by following that rule.
Once you’ve identified these companies, it’s time to do your research. Start with the company’s annual report — specifically, management’s annual letter to shareholders. The letter will give you a general narrative of what’s happening with the business and provide context for the numbers in the report.
After that, most of the information and analytical tools that you need to evaluate the business will be available on your broker’s website, such as SEC filings, conference call transcripts, quarterly earnings updates and recent news. Most online brokers also provide tutorials on using their tools and even basic seminars on how to pick stocks.
To learn more about evaluating companies for your portfolio, see our guide on how to research stocks.
You should feel absolutely no pressure to buy a specific number of shares, or to fill your entire portfolio with a single stock all at once, especially since most brokerages we review now offer fractional shares. What that means is you can invest in pricey stocks with much less money.
Many brokerages offer a tool that converts dollar amounts to shares, too. This can be helpful if you have a set amount you’d like to invest — say, $500 — and want to know how many shares that amount could buy.
If you're ready to put real money down, you can start small. You could consider purchasing just a single share to get a feel for what it’s like to own individual stocks and whether you have the fortitude to ride through the rough patches with minimal sleep loss. You can add stocks over time as you gain comfort trading.
Want some practice first?
If you need a little warm-up before you’re ready to buy a stock, you could also consider practicing with a stock market simulator to get your feet wet. Some brokers also offer paper trading, where you can learn how to buy and sell stocks using play money.
4. Choose an order type
An order type refers to how you place a stock purchase. Don’t be put off by all the options on your broker's online order page. Investors have built successful careers buying stocks solely with two order types: market orders and limit orders.
Market orders
With a market order, you’re indicating that you’ll buy or sell the stock at the best available current market price. Because a market order places no price parameters on the trade, your order should be executed immediately and filled in full.
Don’t be surprised if the price you pay — or receive, if you’re selling — is not the exact price you were quoted just seconds before. Bid and ask prices fluctuate constantly throughout the day. That’s why a market order is best used when buying stocks that don’t experience wide price swings (e.g., steady blue-chip stocks as opposed to smaller, more volatile companies).
Good to know: A market order is best suited for buy-and-hold investors, for whom small price differences are less important than ensuring that the trade is fully executed.
Limit orders
A limit order gives you more control over the price at which your trade is executed. If XYZ stock is trading at $100 a share and you think a $95 per-share price is more in line with how you value the company, your limit order tells your broker to hold tight and execute your order only when the price drops to that level. On the selling side, a limit order tells your broker to part with the shares once the bid rises to the level you set.
Limit orders are a valuable tool for investors buying and selling stocks of smaller companies, which tend to experience wider spreads due to fluctuations in investor activity. They're also good for investing during periods of short-term stock market volatility or when the stock price is more important than order fulfillment.
There are many more sophisticated trading moves and complex order types outside of what we've covered above. You don't have to worry about those right now or maybe ever.
Good to know: If your broker charges commissions (which is rare among online brokers), limit orders can cost more than market orders.
5. Execute the trade
Once you decide on an order type, make sure you have sufficient funds in your account to place the order. Once you click the “buy” button, you’ve executed the trade, but you’ll still have to wait a bit to officially take ownership of those shares. This process — known as settlement — usually happens within one business day with a market order. If you place a market order trade “after hours” (after 4 p.m. EST), when the markets have closed for the day, your order will be placed at the prevailing price when the exchanges next open for trading.
Limit orders can operate differently. While a limit order guarantees the price you’ll get if the order is executed, there's no guarantee that the order will be filled fully, partially or even at all. Limit orders are placed on a first-come, first-served basis, and only after market orders are filled, and only if the stock stays within your set parameters long enough for the broker to execute the trade.
A limit order that can't be executed in full at once or within a single trading day may continue to be filled over subsequent days, with transaction costs charged each day a trade is made. If the stock never reaches the level of your limit order by the time it expires, the trade will not be executed.
Regardless of the type of trade you place, once it’s finalized, you should receive an email or notice from your broker outlining the transaction details. You’ll also see the stock in your portfolio, and you’ll be able to follow its performance. That performance can change day to day, even hour by hour, but remember you won’t lock in any actual losses or gains until you sell the share.
Watch NerdWallet Investing Editor Chris Davis demonstrate how to place a trade on Robinhood →
This is not financial advice, nor is this a recommendation of Robinhood, Vanguard, or any investments or strategies discussed in this video. Content is for demonstration purposes only.
Frequently Asked Questions
Can I buy stocks on my own, without a brokerage account?
In recent years, online brokers and investing apps have made it extremely easy for beginners to sign up for and use their services. For most new investors, an online brokerage account is the easiest way to enter the stock market.
But if you’re still keen to start investing without a broker, look for companies that offer direct stock plans, which let you purchase shares directly from the company for a low fee or no fee at all. These programs may also offer the advantage of investing by dollar amount rather than by share, and often let investors set up recurring investments.
Another way to buy stocks without a broker is through a dividend reinvestment plan, which allows investors to automatically reinvest dividends back into the stock rather than taking them as income. Like direct stock plans, though, you’ll have to seek out the companies that offer these programs.
What are some cheap stocks to buy now?
It’s important to note that the price of a stock doesn’t tell you everything you need to know about a company you’re considering investing in. Price reflects how much investors are willing to buy or sell the stock for — not the intrinsic value of the company, nor the direction in which the company’s stock price is headed. Just because a stock is “cheap” doesn’t mean it’s a good buy.
That said, there are ways to find stocks that may be undervalued. This strategy helps investors identify proven companies with stock prices that may be lower than the stock is worth due to external factors, such as a down market overall.
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