You need a brokerage account, money to invest, and a way to place an order

Buying stocks means purchasing shares of a company through a brokerage firm — a financial company licensed to buy and sell securities on your behalf. You cannot buy stocks directly from a company or from the stock exchange itself. A brokerage holds your account, executes your trades, and keeps records of what you own.

The process has three parts: opening an account with a brokerage, funding that account with money, and then placing an order to buy specific stocks. Most brokerages now let you do all three online in under an hour. The actual purchase happens in seconds once you submit an order during market hours.

What you pay depends on the stock price, how many shares you buy, and whether your brokerage charges a commission. Most major brokerages charge zero commission on stock trades, though some smaller or specialty firms still do. You will also pay the bid-ask spread — the tiny difference between what buyers will pay and what sellers want — but that is built into the price you see.

Key Takeaways

  • You must open an account with a brokerage firm before you can buy any stocks; the brokerage is the licensed intermediary between you and the stock market.
  • Most online brokerages charge no commission on stock trades, but you will pay the bid-ask spread and may pay fees for certain account types or services.
  • You need to fund your account by transferring money from a bank account, and that money sits in your brokerage account until you use it to buy stocks.
  • Stock orders execute during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), and you will see the exact price you paid within seconds of placing the order.

Choosing a brokerage and opening an account

A brokerage is a company regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) that holds your money and executes your trades. Common brokerages include Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Robinhood, and Webull, though there are dozens of others. Each one offers a web platform and a mobile app, and most have zero-commission stock trading.

To open an account, you will need your Social Security number, a government-issued ID, your date of birth, and your current address. You will also need to link a bank account so you can transfer money in. The brokerage will verify your identity electronically, usually within minutes. Some brokerages ask you to answer questions about your investment experience and financial situation — this is called a suitability assessment, and it helps them understand your risk tolerance, though it does not prevent you from buying any particular stock.

Once your account is open, you can choose between a standard taxable brokerage account or a retirement account like an IRA. A taxable account has no contribution limits and no restrictions on when you can withdraw money, but you will owe capital gains tax on profits. A retirement account has annual contribution limits and tax advantages, but withdrawing before age 59½ usually triggers penalties. Most people starting out open a taxable account first.

Funding your account and understanding account types

After your account opens, you need to transfer money into it. You do this by linking your bank account to your brokerage account and initiating an electronic transfer. The money usually arrives within one to three business days. Until you use that money to buy stocks, it sits in a cash position in your brokerage account, sometimes earning a small amount of interest.

Different account types have different rules. A standard brokerage account (also called a taxable account) lets you buy and sell stocks anytime with no limits on how much you can invest or withdraw. A Roth IRA lets you contribute up to $7,000 per year (as of 2024, though this amount changes) and you pay no tax on gains, but you cannot withdraw earnings before age 59½ without a penalty. A Traditional IRA lets you deduct contributions from your taxes now but you pay tax on withdrawals later. A 401(k) is offered through an employer and has higher contribution limits.

For someone buying stocks for the first time, a standard brokerage account is usually the simplest choice. You can start with any amount — some brokerages have no minimum, though others ask for $500 or $1,000 to begin.

Placing your first stock order

Once your account is funded, you can place an order. Log into your brokerage account and search for the stock you want to buy by its ticker symbol — a one- to five-letter code like AAPL for Apple or MSFT for Microsoft. The platform will show you the current price, recent trading history, and basic company information.

When you are ready to buy, you will enter the number of shares you want and choose an order type. A market order buys immediately at the current market price — this is the simplest option and usually executes within seconds during market hours. A limit order lets you set a maximum price you are willing to pay; the order only executes if the stock drops to that price or lower. Limit orders can take hours or days to fill, or may not fill at all if the price never reaches your limit.

Review the order summary — it will show the number of shares, the estimated total cost, and any fees — then submit. The order executes almost instantly during market hours (9:30 a.m. to 4 p.m. Eastern time, Monday through Friday). You will see a confirmation with the exact price you paid per share and the total amount deducted from your account. The shares now appear in your account holdings.

What happens after you buy: ownership and record-keeping

Once you own shares, the brokerage holds them in your account and keeps a record of your ownership. You do not receive a physical stock certificate anymore — everything is electronic. Your brokerage sends you statements showing what you own, how much it is worth, and any dividends or interest you have earned.

If the company pays a dividend (a cash payment to shareholders), it will be deposited into your account automatically. You can reinvest that dividend by buying more shares, or you can leave it as cash. Your brokerage will send you tax documents at the end of the year showing your gains, losses, and dividends — you will need these to file your taxes.

You can sell your shares anytime the market is open by searching for the stock in your account, clicking sell, entering the number of shares, and confirming. The money from the sale goes back into your account as cash, which you can withdraw to your bank account or use to buy other stocks.

Costs and fees you should know about

Most major brokerages charge zero commission on stock trades, meaning you do not pay a flat fee per transaction. However, you will still pay the bid-ask spread — the difference between what buyers will pay and what sellers want. This spread is usually a few cents per share and is built into the price you see; you do not pay it separately.

Some brokerages charge fees for other services: inactivity fees if you do not trade for a long time, wire transfer fees if you move money out, or advisory fees if you use a financial advisor. A few brokerages still charge commission on certain types of trades like options or mutual funds. Read the fee schedule on your brokerage's website before you open an account.

You will also owe capital gains tax on any profit when you sell. If you held the stock for more than one year, you pay long-term capital gains tax, which is usually lower than short-term rates. If you held it for less than one year, you pay short-term capital gains tax at your ordinary income tax rate. Your brokerage will report these gains to the IRS and send you a tax form.

Common mistakes to avoid when buying stocks

Do not buy a stock just because you heard about it from a friend, social media, or a celebrity. Research the company first — read its financial statements, understand what it does, and know why you are buying it. Many new investors buy stocks based on hype and sell at a loss when the price drops.

Do not invest money you cannot afford to lose. Stock prices go up and down, sometimes sharply. If you need the money in the next few years, stocks may not be the right place for it. Keep emergency savings in a savings account, not in stocks.

Do not try to time the market by buying and selling constantly. Research shows that most people who trade frequently end up with lower returns than people who buy and hold. Each trade costs you money in spreads and taxes, and the more you trade, the more you lose to those costs.

Do not put all your money into one stock. Diversification — owning many different stocks across different industries — reduces your risk. Many beginners start by buying a low-cost index fund or exchange-traded fund (ETF) that holds hundreds of stocks, rather than picking individual stocks.

Frequently Asked Questions

Can I buy stocks with a small amount of money?

Yes. Most brokerages have no minimum investment, and since stocks trade in individual shares, you can buy as few or as many as you want. If a stock costs $100 per share and you have $500, you can buy five shares. Some brokerages also offer fractional shares, letting you buy a portion of a share if you cannot afford a whole one.

What is the difference between a stock and a mutual fund?

A stock is a share of ownership in one company. A mutual fund is a collection of many stocks (or bonds) managed by a professional, and you buy shares of the fund itself. Mutual funds spread your risk across many companies, but they usually charge higher fees than buying individual stocks. Index funds and ETFs are types of mutual funds that track a market index and charge lower fees.

Can I buy stocks outside of market hours?

You can place an order anytime, but it will not execute until the market opens. If you place a market order after 4 p.m. on a weekday or anytime on a weekend, it will execute the next time the market opens, at whatever the price is then. Limit orders placed outside market hours will sit and wait to execute if the price hits your limit during market hours.

What if I want to sell my stocks?

Log into your brokerage account, find the stock in your holdings, click sell, enter the number of shares, and confirm. The order executes during market hours at the current market price (if you use a market order) or at your limit price (if you use a limit order). The money appears in your account as cash within one business day.

Do I need a lot of money to start investing in stocks?

No. You can start with whatever you can afford to invest and not need for several years. Many people start with $100 to $500. The key is to start early so your money has time to grow, even if the amount is small. Over decades, small regular investments can grow significantly.