Dealing with the stock markets used to be depicted in television and movies with the image of an obviously wealthy man frantically grabbing the phone and shouting “buy!” or “sell!” into the mouthpiece. Today, the Internet has made buying and selling stocks as easy as clicking a mouse and has opened up the world of trading stocks to anyone who owns a computer or smartphone. Trades do not have to be frantic since they can be made any time of the day or night.
Learning the process of how to buy stocks online can be similar to learning to shop online. The process itself is straightforward, with few moving parts that could complicate buying or selling.
The first step is to choose an online broker, who will do the actual buying and selling for the investor. Those in the brokerage business generally consider these “order takers”. They are the least expensive way to trade stocks, but customers will not have access to certified financial planners or knowledgeable brokers to help guide their investments, making trading decisions more of a do-it-yourself process.
Minimizing available services also means minimizing the fees involved in trading. At full-service brick-and-mortar brokerages, there can be a laundry list of fees, which can eat into profits from a sale. In addition to a fee per trade, brokerage houses can charge for such things as account maintenance, transferring assets, account inactivity, and more.
Online brokerages do not offer trading advice and so typically only charge for transacting the trade for the investor. However, electronic trading has evolved so that most brokerage houses have an Internet trading service, which can offer more services at a higher fee. So while self-directed investors may be comfortable with bare bones trading, others may feel more comfortable with some advice. Choosing the right broker means deciding what type of investor you are.
Once a broker is selected, the investor will need to set up an account of the money that will be used to make trades. Typically, brokers can require minimum accounts of between $500 and $2,500. However, a growing number of brokers do not require any minimum. They all charge for making trades, though, and can charge from $5 to $30 per transaction, depending on the level of the services provided.
Minimum services mean the investor will be doing the homework to decide which stocks to buy. Once a decision has been made, the process simply involved logging into your account, entering the ticket symbol of the company, and indicating the number of shares. The trader also will need to indicate whether they want to buy for the best price available or if they want a limit trade, in which they indicate the price at which the shares will be bought. Limit orders will not have a guaranteed execution.
At this point, the investor’s account will be billed for the total price of the buy. In a sale, the account will be credited with the amount the sale totaled.