How To Buy Stock Online

Joseph Meyer
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Table of Contents

Interested in Learning How?

Avoiding Typical Online Investment Mistakes

What Do You Need to Begin?

How to Earn a 7-Figure Income by Year

1000 Books on Investing (Incl. Quotes)

What You Will Learn inside This Book

Conclusion: Putting It All Together

5 tips to get you started buying stock online

If you’re someone that likes to discuss stocks with friends, family, and other investors, chances are you’ve thought about buying stocks online. Not only is it much cheaper and faster, but you can also buy one share of stock and track its performance over time. That said, if you’ve never invested in stocks online, here are 5 tips to get you started.

Pour Your Foundation

Start by setting aside 10-15 minutes for your very thorough evaluation of the online brokerage company you will do business with. You will be determined to make an educated purchase and not just make a purchase on a whim. Determining which brokerage firm is best will be a great start to your investing experience.

Once you have set aside your time, start creating a list of all the criteria that you deem important. You will want to take your personal buying characteristics into consideration when making your decision.

You will also want to take into consideration things such as:

  • · What kind of trading features does the brokerage company offer?
  • · What reputation does the company have when it comes to outstanding customer service?
  • · What kind of software is being used?
  • · How much do you need to trade for a commission-free stock?
  • · How much does it cost for you to trade stocks and the average commission rate?
  • · How much do you want to put in to start?
  • · How safe will your money be being invested with the brokerage firm?
  • · Are there any investment features?
  • · What kinds of investment details can you get?
  • · What kinds of investment tools might help make your investment experience easier?
  • · Is the company a full online and offline company or do they provide only trading tools?
  • · How many trades can you make for free?

Buying Stocks Online

Most of us would like to be able to invest in the stock market and earn the bigger profits that are available from stocks that pay good dividends or that make sizable capital gains. However, most of us don’t have the time or the money to invest in stocks. So, busier individuals have taken to the internet to buy stock online.

The concept of buying stock online (also known as “paper trading”) is not a new one. Access to the internet has (along with some high-profile fraud cases) made a lot of people skeptical about buying stock online. But the reality is that buying stock online really does offer you the chance to make your investments without taking out a second mortgage. There is no greater tool to learn about investing than to actually invest in stocks. And there is no better place to learn than in the comfort of your own home. The best online brokers offer a wide range of online tools and capabilities that are specifically designed to make investing as easy and hands-off as possible. You can even put the computer to sleep while the trade ticks over to ensure you don’t get those frustrating “bot says buy” or “bot says sell” messages that could so easily tip off a family member to your investment mistake.

Buying Individual Stocks Through

In the past, to purchase individual stocks online, you needed to go to a broker who would deal with the details on your behalf. However, Computershare, a stock information and stock trading service, has changed all that.

Today, Computershare allows individuals to purchase shares online themselves, not to mention that they offer a host of other services, such as the settlement of dividend payments and plan withdrawals.

Buying Stocks Direct From the Issuing Company

In the old days, if you wanted to buy a company’s stock, you had to go through a stockbroker or a financial advisor. You would convey your desire to buy stock to your stockbroker in person, or by using a phone or fax machine. If he was able to execute your order, he would buy shares for you at auction, from a stock broker, or from another client, in much the same way that you buy a used car from a dealer.

To this day, buying stock this way is still considered 1st generation online stock trading. Online stock brokers are pinning their hopes for success on 1st generation online stock trading.

But why would you buy stock this way? The main reason is convenience. Today you can do everything you need to buy and sell stock from the convenience of your car (or your smartphone).

Mutual Funds and Exchange Traded Funds (ETFs)

Mutual funds and exchange traded funds (ETFs) are very similar in many ways. They both represent a pool of investors. The pool of investors allows the fund manager to buy smaller pieces of lots of different stocks, so the managers can invest in more companies and industries. The combination of different investments is what makes the fund's portfolio. By investing in a mutual fund or an ETF, you're able to diversify in a more simple way than if you were to buy individual stocks.

So what's the difference?

Mutual funds and ETFs are similar, but they each have slight differences. Basically, a mutual fund is a basket of stocks that is professionally managed. An ETF is like a mutual fund, but traded and tracked like a stock. Both mutual funds and ETFs require management fees, but the fees are much lower than the management fees of individual investments.

Both mutual funds and ETFs allow you to invest money. Mutual funds allow you to invest directly by buying shares, just like you would for a company. ETFs do not allow you to directly buy new shares. Instead, you would buy and sell shares on the exchange.

So, is one better than the other?

Robo Advisors

The New Way To Enhance Real-World Investing

Robo advisors operate much like any other automated service. There is no contact person. Instead, you fill out a short questionnaire; the robo advisor considers your answers for a few minutes; it can then come up with a portfolio of stocks geared to your personal risk/return profile. Many offer the ability to work within your existing IRA and to re-balance your investments for you.

Robo advisors are online-only services that have many similarities to sites offering financial advice on the internet. All robo advisors are directed at the retail investor, meaning people who invest for themselves with an eye to growing their assets. Robo advisors are not directed at banking and finance professionals, nor at large institutions.

The robo advisor either offers you its own portfolio of funds or directs you to a brokerage where you can choose from a wider selection. Most investors will prove better off using the latter option, and this approach is increasingly used by robo advisors. Robo advisors giving this option include M1 Finance, WiseBanyan, and SwizIQ. Whether you use a robo advisor or do the investing yourself, you should diversify your investments; make sure to hold the largest possible number of index funds.

The Mechanics of Buying Stocks With a Broker

Using a stock trading broker is the perfect way for investors to buy stocks online. This is true whether you are an expert or a beginner. If you are planning to buy stocks online, there is a few things you should know. This will help you better understand how to buy stocks online using a broker.

How does an online broker work?

Think of an online broker as a middle man. They process purchase orders and transmit your instructions to the stock exchange or brokerage that oversees the share that you want to buy. After the stock exchange or brokerage has received the order from the broker, they will carry out the transaction and match your buy order with someone who has already placed a sell order. The transfer of shares from the seller to you, the buyer, will follow this process.

Just because you can buy stocks online, you don’t need to do it all on your own. Many people prefer to buy stocks online as it provides investors with the added advantage of being able to make the most of special offers and valuable brokerage discounts.