You need a brokerage account, money to invest, and a way to pick which stocks to buy

Investing in stocks means buying shares of ownership in companies. To do it, you open an account with a brokerage firm — a company licensed to buy and sell stocks on your behalf. You deposit money into that account, then use it to purchase shares. The brokerage holds the shares in your name and handles the paperwork with the stock exchange.

The three things you must have before you start: a brokerage account (which takes 10 to 20 minutes to open online), money you can afford to leave invested for at least a few years, and a decision about what stocks or funds to buy. Most people do not pick individual stocks; they buy funds that hold many stocks at once, which spreads the risk.

Key Takeaways

  • You open a brokerage account online with firms like Fidelity, Schwab, or Vanguard by providing your name, address, Social Security number, and bank details.
  • You must fund the account by linking a bank account or transferring money, and most brokerages have no minimum deposit, though some funds require $1,000 or more to start.
  • Most new investors buy index funds or exchange-traded funds (ETFs) rather than individual stocks, because they own many companies at once and reduce the risk of losing everything on one bet.
  • Stock prices move every trading day, and the money you invest can go down as well as up — you should not invest money you will need within the next three to five years.
  • Brokerages charge no commission on stock or fund purchases, but some funds charge annual fees, and you pay taxes on gains when you sell.

Opening a brokerage account

You choose a brokerage and go to their website to open an account. The major brokerages — Fidelity, Charles Schwab, Vanguard, E*TRADE, and TD Ameritrade — all have similar processes. You provide your full name, date of birth, Social Security number, address, and employment information. The brokerage verifies your identity and checks you against government lists of people prohibited from trading.

The entire process takes 10 to 20 minutes. Once your account is approved, you link a bank account so you can transfer money in. Most brokerages have no minimum deposit to open the account, though some specific funds or investment products may require $1,000 or $2,500 to start. You can begin with as little as $100 if you choose a fund with no minimum.

After you fund the account, you can buy stocks or funds immediately. The money usually arrives within one to three business days, and you can place an order while it is being transferred.

Choosing between individual stocks and funds

An individual stock is a share in one company. If you buy 10 shares of Apple, you own a small piece of Apple. If Apple does well, the stock price rises and you make money. If Apple struggles, the price falls and you lose money. Individual stocks require you to research companies, understand their finances, and decide which ones will succeed — and most people who try this lose money to people who do it professionally.

A fund is a collection of many stocks bundled together. An index fund tracks a list of companies — for example, the S&P 500 index fund owns shares in 500 large U.S. companies. An exchange-traded fund (ETF) works the same way but trades like a stock during the day. When you buy one fund, you own a tiny piece of hundreds of companies at once. If one company fails, it barely affects your fund because you own so many others.

Most people starting out should buy funds, not individual stocks. Funds cost less time to research, spread your risk across many companies, and historically return about 10 percent per year on average over long periods — though some years are much higher and some are much lower. If you want to buy individual stocks later, you can, but funds are the safer starting point.

Understanding costs and fees

Buying or selling a stock or fund costs nothing at most brokerages — they stopped charging commissions around 2019. However, some funds charge an annual fee called an expense ratio, which is a percentage of the money you have in the fund. An index fund might charge 0.03 percent per year, meaning you pay $3 per year for every $10,000 invested. An actively managed fund might charge 0.5 to 1 percent or more.

When you sell a stock or fund for more than you paid, you owe capital gains tax on the profit. The tax rate depends on how long you held it — if you held it less than one year, it is taxed as regular income; if you held it one year or longer, it is taxed at a lower rate. You do not pay tax until you sell, so you can hold stocks for years without owing anything.

Some accounts, like a 401(k) or Roth IRA, let you invest without paying tax on gains until you withdraw the money — or ever, in the case of a Roth. These accounts have rules about when you can withdraw money, but they are powerful tools for long-term investing.

How to place your first trade

Once your account is funded, you log into your brokerage and look for the "Buy" or "Trade" button. You search for the stock or fund by its ticker symbol — a short code like AAPL for Apple or VOO for the Vanguard S&P 500 ETF. You enter how many shares you want to buy and what price you are willing to pay.

For most investors, you use a market order, which buys at whatever the current price is. The order executes immediately during trading hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order after hours or on a weekend, it waits until the market opens Monday morning.

After you buy, the shares appear in your account within one to two business days. You can watch the price change every day, but most investors do not check constantly — they buy and hold for years, letting the money grow.

Managing risk and realistic expectations

Stock prices move every day based on news, earnings reports, and what other investors think. A fund you buy for $10,000 might be worth $9,500 next month or $12,000. Over long periods — 10 years or more — stocks have historically gone up, but there is no may provide. You could lose money if you sell during a downturn.

Never invest money you will need within three to five years. If you need the money sooner, keep it in a savings account instead. The longer you can leave money invested, the more time it has to recover from downturns and grow.

Diversification — owning many different stocks or funds — reduces risk. A single fund that owns 500 companies is diversified. Buying five different index funds is also diversified. Buying one stock in one company is not.

Tax-advantaged accounts for long-term investing

A 401(k) is an employer retirement account where you contribute money before taxes are taken out. Your employer may match part of what you contribute. The money grows tax-free until you withdraw it after age 59½. A traditional IRA works similarly — you contribute up to $7,000 per year (as of 2024, though this amount changes), and the money grows tax-free until retirement.

A Roth IRA is different: you contribute money after taxes, but it grows tax-free and you never pay tax on withdrawals in retirement. A taxable brokerage account is a regular account with no special tax treatment — you pay tax on gains when you sell. Most people max out their 401(k) and IRA first because of the tax advantages, then use a taxable account for additional investing.

All of these accounts hold the same stocks and funds. The difference is only in how taxes work. Your brokerage can help you open any of these account types.

Frequently Asked Questions

How much money do I need to start investing in stocks?

Most brokerages have no minimum to open an account, so you can start with $100 or $500. Some specific funds require $1,000 or $2,500 to buy in, but many index funds and ETFs have no minimum. Start with whatever you can afford to leave invested for several years.

Can I lose all my money investing in stocks?

If you buy one stock in one company, yes — that company could fail and the stock could become worthless. If you buy a diversified fund like an S&P 500 index fund, it is extremely unlikely. The fund would have to lose 500 large companies at once, which has never happened in U.S. history. Individual stocks are riskier than funds.

When should I sell my stocks?

Most investors buy and hold for years or decades, selling only when they need the money or want to rebalance. Trying to time the market — selling before prices drop and buying before they rise — rarely works. If you bought a fund for long-term retirement, you probably should not sell it just because the price dropped temporarily.

Do I need a financial advisor to invest in stocks?

No. You can open an account and buy index funds on your own in an afternoon. A financial advisor can help if you have complex finances or want personalized guidance, but they charge fees — usually 0.5 to 1 percent of your money per year. For simple investing, you do not need one.

What is the difference between stocks and bonds?

A stock is ownership in a company. A bond is a loan you make to a company or government — they pay you interest and return your money at a set date. Stocks are riskier but historically return more over time. Bonds are safer but return less. Many investors own both.