How to Buy Stocks and Shares

Today, buying stocks and shares is not complicated even though there is a false belief that things are not easy. It is true. How to buy stocks and shares easily is the real mantra and the digital world makes the process easy as well as fast. Before stepping into buying stocks and shares, it is suggested to do some research.

In this article titled How to Buy Stocks and Shares, we will take a look at the process step by step.

Choose Online Broker

The first step is to choose one of the best online stock and share brokers. There are many. The digital world is flooded with stockbrokers. A simple Google search can help in finding some. It is suggested to read reviews of the brokers before striking a deal. If a broker is referred by a good friend or family member, it is better.

Open a trading account with the broker and fund the account. Stocks can be bought from the website of the broker in just a few minutes.

The same can be done from a full-service stockbroker or else buying directly from the company. However, opening an online account is comparatively easier and the entire process takes less than 30 minutes. The application needs to be accompanied by proof of identification. The documents are uploaded on the website. Once verified, the account is opened. The account is thereafter funded electronically.

Research Stocks

It is extremely important to research the stocks before buying. Research the companies which are familiar instead of a new name. It is suggested to avoid getting overwhelmed with the real-time market data while conducting the research. It is a simple concept to look for such companies in which one can become a part-owner.

It is important to look at the annual report of the companies and specifically the annual letter to the shareholders to understand what is happening with the business.

How Many to Buy

It is important to know the budget. This will define how many units of shares to buy. Moreover, it is well said that don't put all the eggs in one basket. This means not investing all the capital in one company. It is better to diversify the portfolio. Sometimes, it becomes important to buy fractional shares of big companies to strengthen the portfolio. Companies like Amazon and Google usually help in getting good returns. Fractional shares of these companies become important.

Terms to Know

  • Ask - The term is used for buyers. Ask price means the buying price. It means the price that a seller is willing to accept.
  • Bid - The term is used for sellers. Bid price means the selling price. It means the price that a buyer is willing to pay.
  • Spread - It is the difference between ask and bid prices.
  • Market Order - It is a request to either sell or buy a stock at the best available price.
  • Limit Order - It is a request to either sell or buy a stock at a specific or better price.
  • Stop Order - It is alternately known as stop-loss. It is automation to execute a market order when the price reaches a certain level. It is used to avoid loss.

Best Stock for Beginners

There is no stock like the best stock. This is the reason market experts advise investing in index funds. However, beginners may consider a couple of blue-chip stocks which are included in the S&P 500 index. These are reliable and stable companies. These companies have a proven track record.

Capital Required to Buy Stocks

If the trading account requires no minimum deposit and charge no transaction fee, one can start even with $10 or buy just a single share of a company.

How to Buy Stocks and Shares Verdict

With tons of online trading platforms and thousands of brokerage houses available online, buying stocks and shares has become extremely easy. There is no need to buy stocks and shares in a traditional way as investors and traders used to do about two decades ago. Things have changed drastically with the development of high-speed internet and smartphones. Buying stocks and shares is now just a couple of clicks away.

In this article titled How to Buy Stocks and Shares, we talked about the process of considering while buying stocks and shares online. It is suggested to use risk-management tools after opening a position. Beginners and novice traders should start slow and with low capital. It is better to start with a demo account that comes with virtual funds.

Ashly Chole - Senior Finance & Technology Editor

How to Buy Stocks and Shares guide updated 17/06/24