This is a step by step tutorial on how to buy any stock on the New York Stock Exchange (NYSE) or the NASDAQ. Please be aware that you can lose money in stocks and many people do, especially when the market goes down.
You should NEVER use money that you know you will need in the foreseeable future because if you put it in the stock market, it might not be there when that time comes. Investing in stocks can be very profitable for investors who are patient and make good decisions. However, if you are looking for a quick short term gain you may find that your investment dollars have gone down if the stock(s) you pick don’t do well right away (and that is always very possible).
The First Step
You will need to choose and online discount broker. Discount brokers give you the cheapest trades available and your money is just as secure there as anywhere else. If you are reading this and just getting started in buying stocks, a discount broker that you find online is perfect for your needs. There is no reason to pay higher prices than they charge. Here is a list of some of the better known brokers you might look into:
There are many online brokers and and most of them have pricing between $5 and $10 per transaction. Each broker is slightly different in that they may specialize in one area or another and of course each of their websites will look different.
I have found that some broker’s websites are easier to navigate than others and for that reason I like some brokers better than others. My personal favorite is E*Trade because the user interface makes sense to me and I can easily find the information I am looking for. I also have accounts with Merrill Lynch and Ameriprise Financial but I don’t like either of those as much as I like my E*Trade account because I don’t feel they are as easy to navigate.
There are different minimums required to open accounts at the brokers listed above. They range from $0 to $2000 and so almost anyone can get started investing in stocks. Just look through the information on each broker’s website to find out what their minimums are.
The Second Step
After picking an online broker, you will need to actually open an account and then put money in that account. Opening a broker account is not much different than opening any other account online now days. You will be asked to give your name and address, a phone number, email address, as well as some other information such as your social security number and personal information about your income, wealth, and investing goals.
You need to answer all fields EXCEPT those personal questions about your income, wealth, and goals. Those questions are mandated by the SEC but there is no rule you have to answer them. If you feel uncomfortable with any of those just leave them blank. You DO need to give them a valid SSN number because your new broker has to make reports to the IRS.
Once you have accurately filled out all the required information, your account will be open and will be waiting for funding. That means it is time for you to put money in the account. You will be able to find information on the website that tells you how to wire money into your account or where to send a check for the funds. Wiring money is the fastest but any way you choose to send money to your account is okay.
Some online brokers actually have real offices in select cities. If the broker you choose has an office where you live, you can also physically take a check and deliver it to them. I have done this multiple times with E*Trade as they have an office where I live.
The Third Step
Once you can go online into your account and see that the money you sent has been received, you can then start buying stocks. I made a short video of how to do this showing what it looks inside the “buy” screen of my E*Trade account:
The actual process of buying and selling stocks online is quite easy but it is understandable that it might be a bit intimidating for a newcomer to investing. If that sounds like you, I would suggest going to Wall Street Survivor and signing up (its free!) to try some simulated stock buys and sells.
WSS is a stock market simulation game where they will give you $100,000 in fake virtual money and you can buy and sell to your heart’s content until you feel you are ready to do it for real. Buying stock on the WSS platform is very similar to what it will be like in your real money online brokerage account so you can really get the hang of how things work. They also have lots of free tutorials and learning material on the stock market and how it works.
The Final Step
If you have gotten this far you will now own shares in your discount broker account of at least one stock. Hopefully it is a stock that has been carefully chosen by you and it will go up just like you want it to. However, chances are that it will go down right away or at some point in your ownership of it. Personally, I think most of the stocks I buy go down soon after I buy them. Bad luck? Or perhaps I only remember the ones that go down? Anyway, you have to get used to the idea that they can go down on any day and you can lose money in those stocks on any particular day.
Whenever you buy a stock you should have a plan. You should decide why you are buying the stock and this probably means that you have an idea of what target price you hope it gets to and what time frame you have for it to get there. Having a specific plan like that makes it easier to decide when to sell your stock.
Deciding when to sell is always harder than deciding when to buy and most investors would agree with that. You see, if you have a winner on your hands, when to take profits and not miss out on more profits can be tough wrestling match that goes on inside of your head. Similarly, when your stock turns out to appear to be a loser, at what point do you actually throw in the towel and accept the loss? Both of those decisions can be very difficult to make.
That is why having some sort of a goal with each stock you buy makes it easier to figure out when to sell. If your stock reaches your target price that means your goal has been achieved and selling should be easier. Conversely, if your stock goes down and doesn’t perform in the way you were hoping it would, deciding to sell becomes a bit easier too. Having a plan and sticking to that plan can be a good idea over your whole investing career.
I wish you luck in your investing endeavors and please ask any questions you might have in the comment section.