How to Buy Shares: A 6-Step Approach from a Professional
You’ve probably imagined many times how you’re going to buy shares in a company and make enough money to travel the world and last you for the rest of your life. Achieving this is not easy, but you have to start somewhere. You don’t need huge amounts of money to start your investing journey, some people start with a few dollars: $100 or less. And the good news is you that can do all of this completely online, from the comfort of your own home, all you’ll need is a brokerage account.
In this article, we will explain jargon-free, in plain English, how to buy shares in a company. Let’s take a look at the six steps for how to buy stocks online!
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The six-step plan to buying shares and to starting stock investing
Buying shares online is not rocket science. Follow this simple six-step plan:
- Find a good online broker
- Open a brokerage account
- Upload money to your brokerage account
- Find a stock you want to buy
- Buy stocks
- Review your share positions regularly
Step 1: Choose a Reliable Online Broker
The first step is to select a trustworthy online broker. You can either use recommendation tools that match brokers to your needs through a short questionnaire, or continue researching to find a suitable option based on general comparisons.
When evaluating brokers, several key factors should be considered, including fees, available stock prices, the quality of the trading platform, access to global markets, and how simple the account setup process is. Security is also a crucial element, but by focusing on well-established and regulated brokers, you can minimize concerns in this area.
Step 2: Open a brokerage account
After finding your online broker, you need to open an investment account to begin trading. This can usually be done online. The investment account is basically what you need to start buying stocks online. Think of it as a bank account where in addition to holding cash, you can also hold shares. Opening an online brokerage account usually takes a couple of days, although at some brokers you can get it done within a day.
Step 3: Upload money to your brokerage account
In order to buy and sell shares online, you need to have money on your investment account.
Minimum deposits can be as low as $20. At some brokers, you can buy fractional shares, so if for example one Amazon share is priced over $2000 and you only want to invest $500, you can still do it.
Usually, you can choose between a bank transfer (ACH) or depositing funds via credit/debit card. At some brokers, you can fund your investment account even via Paypal, e.g. at eToro.
Step 4: Find a stock you want to buy
You can get inspiration from others’ ideas or you can do your own research. For example you could choose to buy into some stocks that Warren Buffett owns. On the other hand, if you put some time and energy into your own stock research, you can learn a lot more from it. Investment ideas can come from your broker in the form of stock reports and analyses, but you can also use independent research. The financial news and investment courses can also be useful in learning how to pick a winning stock and the suitable stock market.
You may consider using a stock screener. WallStreetZen, for example, doesn’t only just show financial data but helps users interpret the data and understand the context.
Step 5: Buy stocks
You have the account, the cash, and the stock you want to buy. Now all you need to do is press the ‘Buy’ button. You log in to your online trading platform, find the stock you have selected, enter the number of shares you wish to buy, and click ‘Buy,’ which will initiate the purchase of shares. Alternatively, you can also just select how much you’d like to spend on the given stock.
When placing an order, you can choose from different order types, e.g. market order, stop order or stop limit order. A market order buys immediately at the current market price, while a limit order allows you to specify the exact price at which you want to buy the shares. Find more details on order types here.
Step 6: Review your share positions regularly
You’re done, you’ve bought the shares, they are yours. Now it is key to monitor your investments.
If you bought the shares with the goal of holding for a longer term, you don’t need to check the price movements every day but you might want to check the quarterly or yearly reports and company guidance. This basically means reviewing your investment strategy from time to time.
For short-term buyers, position management could mean setting up a stop-loss price of where to cut losses, and the target price of where you want to sell stocks, while making a profit.
Now that you have mastered the 6 steps of buying shares, take a moment to look at the top 5 brokers we have selected for you.
Best 5 brokers for buying shares online
As we live in the internet era, trading nowadays takes place on online platforms. Trading floors have turned into well-designed tech platforms with interactive tools and charts.
If you’re just starting to explore how or where to buy shares online, we recommend that you pick one of the following five brokers:
- Interactive Brokers, International broker providing all asset classes
- Zacks Trade, US discount broker
- TradeStation Global, UK-based global stockbroker
- Saxo Bank, Danish investment bank
What makes these brokers a good place to buy shares? The most important selection criteria were the availability of easy-to-use web and mobile trading platforms and fair fees. Other factors we considered were the availability of great educational tools, an easy account opening process, and multiple options for deposit/withdrawal.
Below is a table comparing the quality of the most important factors, i.e. web/mobile platforms and fees for each broker:
| Saxo Bank | Fusion Markets | CMC Markets | Interactive Brokers | Capital.com | |
|---|---|---|---|---|---|
| EURUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| GBPUSD spread | 1.3 | 0.2 | 0.9 | 0.3 | 1.3 |
| AUDUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| EURCHF spread | 1.4 | 0.6 | 2.5 | 0.4 | 2.2 |
| EURGBP spread | 1.4 | 0.3 | 1.1 | 0.2 | 1.5 |
| Saxo Bank | Fusion Markets | CMC Markets | Interactive Brokers | Capital.com | |
|---|---|---|---|---|---|
| EURUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| GBPUSD spread | 1.3 | 0.2 | 0.9 | 0.3 | 1.3 |
| AUDUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| EURCHF spread | 1.4 | 0.6 | 2.5 | 0.4 | 2.2 |
| EURGBP spread | 1.4 | 0.3 | 1.1 | 0.2 | 1.5 |
Not sure which broker? For a tailored recommendation, check out our broker finder tool. You can enter your country and it will show only those brokers that are available to you. Want more details? Compare brokers with the help of this detailed comparison table.
Now, let’s see some more details about the best brokers for buying stocks.
Interactive Brokers, one of the biggest US-based discount brokers, was founded in 1977. The broker is regulated by several financial authorities globally, including top-tier ones like the UK’s Financial Conduct Authority (FCA) and the US Securities and Exchange Commission (SEC).
Given that the broker has licenses from multiple top-tier regulators, Interactive Brokers is considered safe. The fact that it has a long track record and publicly disclosed financials while being listed on a stock exchange all point to IB being a safe service provider.
Interactive Brokers recently launched a new app for global stock trading: read our review of IBKR GlobalTrader.
In addition, Interactive Brokers also has an app you can use for ESG investing: read our review of IMPACT by Interactive Brokers.
Zacks Trade is a US-based discount broker and a division of LBMZ Securities. LBMZ Securities was founded in 1978 and is regulated by the top-tier US financial authorities SEC and FINRA.
LBMZ Securities’s clearing and execution services are provided through Interactive Brokers, a global stockbroker regulated by many top-tier financial authorities globally.
If you’re familiar with the services of Interactive Brokers, you might notice that many of Zacks Trade’s services are the same. To sum up:
- Zacks Trade has its own, different fee structure, product selection, educational tools and customer support. Unlike at Interactive Brokers, trading forex, CFDs and futures is not supported.
- The account opening and deposit/withdrawal processes, trading platforms and research tools are the same as at Interactive Brokers.
Zacks Trade is considered safe because it has a long track record and is overseen by top-tier regulators.
Since Zacks is more expensive than IB, why would anyone favor Zacks over Interactive Brokers? We found two possible reasons:
- Zacks falls under SEC regulation and users have SIPC protection, no matter where they live
- Zacks provides free broker-assisted trading
TradeStation Global is a brand of TradeStation International Ltd, which is based in the UK and is regulated by the top-tier Financial Conduct Authority (FCA).
TradeStation Global is a combined product offered by Interactive Brokers (IB) and TradeStation for clients outside the EU/EEA. Here are its most important elements:
- The account opening, deposit/withdrawal options, and available products are the same as at Interactive Brokers.
- You can use both Interactive Brokers’s and TradeStation’s own desktop platform.
- TradeStation Global charges its own fees, and offers its own customer support and educational tools.
Both Interactive Brokers and TradeStation are reputable brokers, regulated by top-tier financial authorities. While Interactive Brokers is listed on the NASDAQ, TradeStation itself is not: only TradeStation’s parent company Monex is listed, on the Tokyo Stock Exchange.
Saxo Bank, a Danish investment bank founded in 1992, provides online trading and investment services. The company is regulated by several financial authorities globally, including the Danish Financial Services Agency (FSA) and the UK’s Financial Conduct Authority (FCA).
Saxo Bank is a global service provider and as such it operates a number of separate legal entities in different regions of the world. The services offered by the various entities may differ slightly, especially with respect to fees and product portfolios. In this review, we tested Saxo Markets UK.
Being regulated by top-tier financial authorities, having a long track record and a banking background are all good signs for Saxo Bank’s safety.
HEADS UP: Recent issues with account opening – Saxo Bank seems to have a delay in sending you a crucial URL needed to start your account opening. For more info, see Saxo Bank account opening issues in the review’s ‘Account opening’ chapter. Don’t want to wait to open an account? Check out some Saxo Bank alternatives.
What does buying shares in a company really mean?
When you buy shares in a company you become a shareholder, i.e. an owner of that company in a very small percentage.
For example, Tesla has 185 million shares to buy (outstanding). When you buy 100 Tesla company shares, you will be one of the owners of Tesla. Your ownership percentage will be very tiny, 0.000055% (100/185 million), but still, you will be an owner with all the rights that come with this ownership:
- The right to receive dividends – when the company allocates dividends, you will receive a part of this. Staying with the previous Tesla example, let’s assume that in 2020 Tesla will pay $100 million in dividends, then you will receive $55 (0.000055%*100 million).
- The right of voting – if you are a shareholder of a company, you have the right to participate at the company’s annual meeting. At the annual meeting, you will have the right to vote on the topics that will fundamentally influence the future of the company. These topics can vary from the election of the board of directors to the amount of the dividends allocated.
Speaking about financial literacy: when you read about buying shares online, you may find that both the expressions stock and share are used. What is the difference between them? The word stock is the general term for company ownership. For example “I invest in American tech stocks like Apple and Facebook”. Share usually refers to the ownership stake in a company. For example “Yesterday I bought 100 Tesla shares.”
Manage the risk of buying shares
Investments always come with some risks that you should aim to manage. Below, you can find the most common ones and our advice on how to mitigate them.
Avoid the scams
Risk: Unfortunately, tons of scam “brokers” are out there on the market trying to steal your money. When you see ads for binary options trading or automated investment algorithms that generate outstanding returns, start to get suspicious. In these cases, the best thing to do is to ignore these ads.
How to manage it: When buying shares online, go with our broker selection. We have an active account with the brokers we selected and we test them regularly.
Diversify your portfolio
Risk: If you put all of your savings in just one or two stocks, and the company you selected goes bust, you could lose all your invested money. A similar risk is when the majority of your stock holdings are in the same industry.
How to manage it: Diversify your investment portfolio. This practically means buying many different shares and not putting all your eggs in one basket.
Avoid crappy stocks
Risk: when buying individual stocks, there is always a risk of selecting the wrong ones. Here, ‘wrong’ could mean anything from a company that defaults to just buying an overpriced share.
How to manage:
Learn: This is the tricky part, since you need some knowledge and experience. The best is to start learning by reading books on investment and taking online courses. There are tons of great books out there, but you can start with the Intelligent Investor by Benjamin Graham. This is also the book on investment most recommended by Warren Buffet.
Gather information: While you are learning, start collecting as much information about your target companies as possible. Read the company presentations and quarterly reports on their website (usually found in the IR -Investor Relations- section), understand their business profiles, start playing around with their income statements, gain some knowledge about their management background or even attend their annual meetings. These will help you gain a better understanding of the company and the specific industry.
Compare multiples: When it comes to pricing, use industry multiples as a proxy for your target stock. P/E is a basic multiple, but each sector has its own favorite.
Your investment account can be protected
Since you are trading with your savings, it is very important to pay attention to safety. The brokerage services we selected have some of the best protection schemes, the level of which depends on the regulatory body of the broker (learn more about investor protection).
| Saxo Bank | Fusion Markets | CMC Markets | Interactive Brokers | Capital.com | |
|---|---|---|---|---|---|
| EURUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| GBPUSD spread | 1.3 | 0.2 | 0.9 | 0.3 | 1.3 |
| AUDUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| EURCHF spread | 1.4 | 0.6 | 2.5 | 0.4 | 2.2 |
| EURGBP spread | 1.4 | 0.3 | 1.1 | 0.2 | 1.5 |
You can compare the protection amount among all reviewed brokers.
Tip: Use national tax free accounts
In your country of residence, you may have the option to open special investment accounts that offer favorable tax conditions. For example, in the UK, this account is the ISA, the Individual Saving Account, which is exempt from income tax and capital gains tax on the investment returns. In the US, individual retirement accounts (IRA) offer many benefits.
Bottom line
“How to buy a company’s stock? How to invest in shares? Where to buy shares?” – Were these things you were asking until now?
Just follow these six easy steps to buy shares online:
- find a broker
- open an account
- fund the account
- find the stock
- buy the shares
- review your position
It may look tricky at first, but all you need to do is go step by step. See you at the next Coca-Cola or Berkshire annual meeting!
If you’re still in doubt about which broker to choose, we compiled a brief summary to help:
| Saxo Bank | Fusion Markets | CMC Markets | Interactive Brokers | Capital.com | |
|---|---|---|---|---|---|
| EURUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| GBPUSD spread | 1.3 | 0.2 | 0.9 | 0.3 | 1.3 |
| AUDUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| EURCHF spread | 1.4 | 0.6 | 2.5 | 0.4 | 2.2 |
| EURGBP spread | 1.4 | 0.3 | 1.1 | 0.2 | 1.5 |
