How to buy stocks online

Buying stocks online may sounds complicated, but it's actually quite simple once you understand a few basics. We'll show you what you need to know.

Last updated on January 28, 2023, and last reviewed by an expert on January 13, 2022.

The stock market can feel like an intimidating place for those who are just getting started in investing. But buying stocks online is actually fairly simple once you understand a few basics about where to buy them and how they’re traded. Let’s take a look at what you need to know if you’re just beginning with stock trading and building a portfolio.

Buying stocks online: A step-by-step guide

1. Open a brokerage account

In order to invest online in individual stocks, you’ll need to open a brokerage account at one of several brokers such as Fidelity, Schwab, or Webull. The process of opening an account is fairly straightforward and shouldn’t take much more than a few minutes. You’ll need to provide basic information about yourself and any other people on the account.

2. Fund the account

The next step is to actually put money into your account so that you have funds to invest. This can be done by sending a physical check through the mail, but it’s much more convenient to set up an electronic transfer. To transfer funds electronically, you’ll provide the account information and the financial institution where you’d like to transfer money from. Your money should arrive in your account within a few days.

3. Research stocks you’re interested in

Before buying any stock, you’ll want to do some research on the companies you’re considering. Make sure to read the company’s annual report, or 10-K filing with the Securities and Exchange Commission (SEC), as well as the most recent quarterly reports to get a better understanding of the business and how it’s performing.

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Before you make a purchase, you should be able to explain how a company makes money, its position relative to competitors, and what you think the next three to five years are likely to look like for the business. Be sure to pay attention to valuation, or what you’re paying compared to what you’re getting as a shareholder.

4. Place a trade order

Once you’ve zeroed in on a stock to buy, you will need to place a trade order. You will likely have a few different options when placing a trade. Here are the two most common types:

You will also face choices on how long you want the trade order to be valid for and whether you want the order to be “all or none,” which means the order won’t be filled unless you can purchase all the shares you’ve asked for. Orders are valid for the rest of the trading day or are “good till cancelled,” meaning the order will usually stand open for 60-90 days or until it’s filled.

Is it safe to buy stocks online?

Yes, it is safe to buy and sell stocks online as long as you’re using a reputable broker. You even have some protection in the event that the brokerage firm fails thanks to the Securities Investor Protection Corporation (SIPC). The SIPC was created in 1970 and protects customers at SIPC-member brokers for up to $500,000 in all accounts at a firm, including a maximum of $250,000 for uninvested cash.

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Where can you buy stocks online for free?

You can buy stocks without paying commissions at most online brokers these days. Charles Schwab, E-Trade and Robinhood all offer commission-free trading in stocks as well as ETFs. Robinhood even offers commission-free trades in options and cryptocurrencies.

Can you buy stocks online without a broker?

Opening an account with an online broker is going to be the easiest path to online investing. Some companies allow investors to purchase shares directly from them and participate in dividend-reinvestment plans, but online brokers are a good choice for most people. They offer easy-to-use platforms and commission-free trading. Signing up for a new account should only take a few minutes.

What do you need to buy stocks online?

Fortunately, not too much. You’ll need a brokerage account with an online broker, which can be opened in just a few minutes with some basic personal information, as well as a way to fund your account. Funds can be deposited by check or through an electronic transfer.

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What stocks should and shouldn’t be traded online?

If you understand the business of the company you’re buying, almost no stocks are off-limits for online trading. Dividend stocks, tech stocks, and everything in between are all available to trade online. You can even trade options online, but most brokers still charge a small fee for that. Make sure to do your research before making the plunge, otherwise you’re just speculating. However, penny stocks, which the SEC defines as stocks that sell for less than $5 per share, should be viewed with caution because they can be particularly volatile and are ripe for manipulation.

How much money do you need to buy stocks online?

Not very much. Most online brokerages don’t have minimum requirements to open an account and through the trading of fractional shares, investors can now buy into their favorite companies for as little as $5. With many of today’s leading companies’ shares selling for hundreds or thousands of dollars, some brokers offer investors the chance to buy a portion of a share for just a few dollars.

The bottom line

Buying stocks online is a fairly simple process once you understand a few key terms and processes. But just because it’s simple doesn’t mean it’s easy. Make sure to carefully research any company before buying (or selling) its stock to better understand the risks that come with investing in individual shares.

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