How to Buy Stocks Online for Beginners

An online brokerage account lets you enter stock orders anywhere you have Internet access.
Image Credit: Goodshoot/Goodshoot/Getty Images

You need an account with an investments brokerage firm if you want to trade stocks. While you can go to a full-service broker for advice and recommendations about which stocks best fit your needs, this kind of service is expensive. You can cut your costs and take complete control of your investment decisions by trading through an online brokerage firm, even if you are a novice investor.

Learn the Terminology

The investments industry has its own jargon, just like any other profession. If you are going to make your own investment decisions without a stockbroker to explain what the terminology means, you need to learn it for yourself. For example, when you get ready to buy a stock online, you don't just enter a buy order. You might enter a buy-at-the-market order, a buy-limit order or a good-til-canceled-buy order. When you want to sell, you don't just enter a sell order. You might enter a sell-at-the-market order, a stop-loss-sell order or an all-or-none-sell order. Knowing the jargon will help you trade stocks online more effectively.

Research Online Brokers

You can't trade stocks online on your own. You must have an account with a brokerage firm. There are plenty of online brokerage firms that will execute your orders for a fee, but some online brokerage firms offer additional services that might be beneficial. When researching online brokers you should consider their fees and commissions, the type of investments they offer, access to research and ease of navigating their websites. Make sure any online brokerage firm you do business with is a member of the Securities Investor Protection Corp.

Define Your Goals

If you don't know where the target is, chances are you won't hit a bull's eye. The same is true with investing. You must define your investment goals before you make your first online stock trade. It doesn't matter if your goal is capital preservation, current income, capital appreciation or speculative growth. It does matter that you know what your goal is. This will guide your investment decisions. The stock of the best company in the world might not be the best investment for your portfolio if it doesn't match your investment goal. For example, if your goal is current income, it does you no good to invest in a stock that has never paid a dividend.

Start Trading

Once you know the terminology and have selected an online broker and defined your goals, it's time to start trading stocks online. Find your selected broker's website and click on the link for opening a new account. You'll need to provide certain personal information, such as your name, address and Social Security number. Once you've opened your account, your online broker will probably ask you to fund your account by making a minimum deposit. With your account open and funds on deposit, you are ready to make your first stock trade.

references & resources