Buying stocks for the first time can seem daunting, but it doesn’t have to be. Here is a step-by-step guide on how to buy your first stock.
Why Should You Buy Stocks?
Here are some key reasons why buying stocks can be a good idea:
- Stocks allow you to invest in companies you believe in and share in their growth.
- Investing in the stock market provides the potential for higher returns than saving money in a traditional bank account.
- Owning stocks helps diversify your investments beyond just cash.
- Stocks can provide regular income in the form of dividends.
- The stock market has historically gone up over long periods of time.
Step 1: Decide How You Want to Invest
The first step is deciding how you want to invest in stocks:
- Invest on your own through an online brokerage account. This allows you to select your own stocks but requires more research.
- Use a robo-advisor that will recommend portfolios and rebalance for you. This automates investing but provides less control.
- Try a micro-investing app that allows you to invest spare change. This is the simplest way to start but has the least control over specific stocks.
Most first-time investors opt to use an online brokerage account for greater flexibility.
Popular brokerages include:
- Charles Schwab
- TD Ameritrade
Step 2: Open a Brokerage Account
Once you’ve selected a brokerage, opening an account is straightforward:
- Go to the brokerage’s website and click to open a new account.
- Provide your personal information like name, birthdate, contact details.
- Select the type of account you want to open: individual taxable, IRA, etc.
- Provide your Social Security Number for tax purposes.
- Accept the brokerage terms and conditions to open the account.
The account opening process only takes about 5-10 minutes for most brokerages. Many allow you to fund your account immediately via electronic bank transfer.
Step 3: Fund Your Brokerage Account
You’ll need to deposit money in order to buy stocks. Brokerages typically offer multiple ways to transfer funds:
- Link a bank account to transfer money electronically
- Use a debit card for instant transfers
- Send a check by mail
- Wire money from your bank
Aim to fund your account with a few thousand dollars to start. It’s tough to properly diversify with less than that. You can always add more funds over time.
Step 4: Choose Your First Stock
Now for the fun part – picking your first stock investment!
Set Investing Goals
Before choosing a stock, think about your:
- Risk tolerance – how much fluctuation in value can you handle?
- Time horizon – how long until you need the money?
- Reasons for investing – potential returns, dividends, etc.
Match stocks to your goals. Aggressive growth stocks may not fit if you want low risk or need money soon.
Stock Research Tips
Perform research to find potential stocks:
- Screen for stocks that fit your goals using filters on Yahoo Finance or Google Finance
- Look at stock research reports on sites like Morningstar
- Review financial news like Barron’s and MarketWatch
Focus on the company’s long-term fundamentals like earnings growth, competitive advantages, and management strength. Avoid hype around daily stock price changes.
Places to Buy First Stocks
For your first stock, consider large, stable companies in industries you understand. Common starter stocks include:
- Blue chip stocks – companies like Apple, Microsoft, Amazon
- Dividend stocks – companies like Coca-Cola, Johnson & Johnson
- Growth stocks – companies like Alphabet, Netflix, Nvidia
- Consumer stocks – companies like Nike, Starbucks, Home Depot
This table compares some potential first stock picks:
|Apple||Blue Chip Tech||World’s largest technology company makes iconic products like the iPhone|
|Johnson & Johnson||Blue Chip Healthcare||Massive healthcare conglomerate with focus on pharmaceuticals and consumer products|
|Starbucks||Consumer Discretionary||Global coffee shop chain with growth and dividends|
|Bank of America||Financials||Top US retail bank with operations across the country|
Make Your First Trade
Once you’ve selected a stock, it’s time to buy shares! Follow these steps:
- Enter the stock ticker symbol (e.g. AAPL for Apple)
- Choose number of shares or dollar amount to purchase
- Select market order to buy immediately or limit order to buy if price drops to specified level
- Review order details and confirm
- Your purchase will execute in seconds during market hours
And that’s it – you’ve bought your first stock holding. It will show up in your brokerage account along with its value based on the current market price.
Step 5: Monitor and Manage Your Portfolio
As a new investor, be sure to:
- Regularly review your stock to check if your reasons for owning it still hold true.
- Reinvest dividends if the stock pays them. This accumulates more shares over time.
- Diversify your portfolio by adding more stocks in different sectors to reduce risk.
- Sell for the right reasons like major changes to the stock’s fundamentals or if your investment goals change. Avoid selling based just on share price movements.
Utilize tools offered by your brokerage to track portfolio performance and get alerted to news about your stocks.
Investing for the Long-Term
The keys to success with stocks are patience and consistency. Follow these best practices:
- Invest a set amount consistently, like monthly. This avoids trying to “time” the market.
- Reinvest all gains to compound earnings over decades.
- Don’t panic sell during market declines. Stocks tend to rebound over longer periods.
- Use any dips as a chance to buy more shares at lower prices.
By starting early and sticking to a long-term plan, your first stock investment could be the start of building real wealth.
Summary of How to Buy Your First Stock
Here are the key steps covered in this guide:
- Decide how you want to invest – brokerage account, robo-advisor, micro-investing app
- Open a brokerage account like Fidelity, E*Trade, TD Ameritrade
- Fund your brokerage account via electronic bank transfer, debit card, check, wire
- Research stocks and companies to find your first investment
- Buy shares of your chosen stock with a market order or limit order trade
- Monitor your stock and portfolio and reinvest earnings
- Maintain a long-term mindset and invest consistently over decades
Investing in that first stock opens the door to the wealth building potential of the stock market. Use this guide to confidently take that important first step.
This article is created with information from the following sources:
- “How to Buy Stocks: 14 Steps (with Pictures) – wikiHow”
- “How to Buy Your First Stock: The Ultimate Step-by-Step Guide”
- “How to Buy Your First Stock: 12 Steps (with Pictures) – wikiHow”
- “How to Invest in Stocks: A 6-Step Guide for Beginners”