A Beginner's Guide to Buying Stock

So, you've decided to invest in the stock market. You even have some ideas about which stocks you want to buy. But how do you actually buy shares of your favorite companies?

In this article, we'll discuss the basics of how to buy your first stocks in an easy-to-understand way. Follow these simple steps, and you'll be ready to start building a stock portfolio of your own.

How do you actually buy shares of stock?

Fortunately, the process of buying stock online is relatively quick and easy.

• First, you'll need to open a brokerage account.
• Next, you must decide which stocks you'd like to buy.
• Determine how many shares of each you want to buy.
• Decide which type of stock order is best. Typically, this means either a market order or a limit order.
• Enter your order, hit the buy button, and become a shareholder.
• Build your portfolio over time by repeating the process.

Here's a more detailed, step-by-step guide to start your stock investing journey.

1. Open a brokerage account

First, you'll need an investing account, known as a brokerage account, to buy stock. Think of a brokerage account as a bank account that is designed to hold investments.

It's important to consider two main factors when selecting an online stock brokerage:

What does the brokerage offer?

Some brokerages provide excellent educational resources for new investors. Others provide access to stock research and analytical tools. Some brokerages even maintain branches where you can receive in-person guidance.

Perhaps other features, such as the ability to trade international stocks or buy fractional shares, are important to you. Of course, many investors simply want an easy-to-use app for buying and selling stocks, and some platforms certainly offer that.

Is the brokerage platform user-friendly?

Is the brokerage platform easy to navigate? If you want to trade using your mobile device, the brokerage's mobile trading app must be easy to use.

Most brokerages allow you to use play money to experience their trading platforms before you invest your own money, so try a few to decide which platform you like most.

One very important thing to know is that brokers typically publish a fee schedule that breaks down all the potential costs of being their customer. It should be fairly easy to find by searching for "[broker name] fee schedule."

Once you've chosen a brokerage, you must complete a new investment account application. This process is typically quick, but you'll need to have certain information handy, such as a driver's license and Social Security number.

You can choose to open a standard brokerage account or establish an individual retirement account (IRA) if you're planning to invest for retirement.

2. Decide which stocks you want to buy

In this article, we won't go too deep into the many possible methods of researching and selecting individual stocks to buy. However, the next step is to determine which stocks you'd like to own. Here are a couple of pointers:

Follow a buy-and-hold strategy

Buy stocks because you believe their underlying businesses will be worth more in a few years. Don't buy a stock just because you think it will perform well over the next few weeks or months.

It's worth specifically stating that day trading -- buying and selling a stock on the same day or even within a few weeks -- is best left to the professionals.

Diversify your holdings

Don't put all your money into just one or two stocks. Even if you're investing only a relatively small amount of money to start, diversify your portfolio by buying a few shares of several different stocks. With fractional share investing available through many brokers, you can create a diversified stock portfolio, even with a small amount of money.

Learn more about how to choose which stocks to buy by checking out our comprehensive guide to investing in the stock market. Or check out some of the top stocks to buy right now if you need some inspiration.

3. Decide how many shares to buy

To determine how many shares you should buy, first decide how much money you want to invest in each stock that interests you and then divide this amount by the stock's current share price. You can find stock prices on your brokerage's platform by searching for either the stock's ticker symbol or the company's name.

Some brokerages allow you to buy or sell fractional shares. This is especially common with app-focused brokers.

For example, let's say you want to invest $1,000 in Microsoft (NASDAQ:MSFT). You use Microsoft's stock ticker symbol (MSFT) to check its share price and find that it was about $530 in August 2025. Dividing $1,000 by this share price indicates you can buy as many as 1.89 shares.

If your broker doesn't trade fractional shares, you would purchase one share of Microsoft stock and have $470 left over. With fractional shares, you can invest your entire $1,000.

4. Choose an order type

Different order types exist for stock purchases. For our purposes, there are two types of orders you should know about.

A market order -- which instructs your broker to buy the stock immediately and at the best available price -- is typically the best order type for buy-and-hold investors.

On the other hand, you may want to place a limit order, which indicates to your broker the maximum price you're willing to pay for a stock.

For example, let's say a stock is currently trading for $20.50 per share. You want to buy it only when the price is less than $20, so you place a limit order. Your broker then buys shares on your behalf only if the stock's price dips below $20.

5. Place the stock order with your brokerage

To place a stock order, go to the appropriate section of your online broker's platform and enter the required information. You will enter the company name or stock ticker, and whether you want to buy or sell shares (the exact process varies slightly). You'll also enter either the dollar amount you want to spend or the number of shares you want to buy.

After you tap the button to place your order, your stock purchase should be executed in seconds (if you've made a market order).

6. Build your portfolio

The final step in this process is to build out your investment portfolio. The best way to build wealth is by adding money to your brokerage account and investing in stocks you'd like to own.

As a final thought, it can be tempting to monitor your stocks' performance every day, especially at first. But it's important not to get too caught up in the short-term market noise and maintain a long-term mindset.

Why buy stocks?

There are some good reasons to buy stocks, but the No. 1 reason is to build wealth over long periods of time. Stocks can be rather volatile over the short term, but have historically been the best-performing major asset class over periods of decades.

Stocks can also be valuable tools for retirees or anyone looking to generate a stream of passive income. Many stocks pay dividends, which are distributions of a company's profits made to shareholders. There are some with incredibly consistent track records of not only paying dividends but also increasing them over time.

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Common types of stocks to invest in

There are far too many categories and subcategories of stocks to discuss all of them here, but here are some of the common categories:

• Growth stocks: Companies that are growing sales (or are expected to) faster than their peers or the overall stock market average.
• Value stocks: Companies whose stocks are trading for a discount to the intrinsic value of the business.
• Dividend stocks: Stocks that distribute some of the company's profits to investors in the form of dividends.
• Blue chip stocks: Stocks of long-established businesses with consistent profitability and financial strength.
• Large-cap stocks: A term used to refer to the largest companies in the stock market. The traditional definition is a $10 billion market capitalization or higher.
• Mid-cap stocks: Traditionally defined as a company with a market cap ranging from $2 billion to $10 billion.
• Small-cap stocks: Stocks of smaller companies, usually defined as less than $2 billion in market cap.

Again, this is not an exhaustive list of stock categories. And it's worth noting that stocks can (and usually do) fit into more than one of these categories. For example, you can have a large-cap stock that's also a dividend stock.

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