A public stock is a share in a corporation offered with the purpose of raising money for the corporation. The shares are available to anyone willing to pay the offered value at first issuance or the market value during share resale. By buying a share of stock, you buy a share in the direct ownership of the offering company. Because of this, the purchase and sell of stocks are heavily regulated, requiring you to take specific steps to obtain shares.
Open a brokerage account with a broker or financial institution. Unless you’re buying your stock directly from the company, a rare happenstance, you’ll need someone licensed to trade on the stock exchange where the stock is traded to purchase the stock.
Fund your brokerage account by transferring cash into the account from some other source. Depending on the brokerage, there may be a minimum needed to fund the account and begin trading.
Make an offer to buy the shares of stock. The offer to buy is when you select a price you’re willing to pay for the stock and wait for someone to sell at that price. This is known as making a limit order and is a way to set automatic stock purchases. Most transactions though are done at the market price, which is the going rate for that particular stock. If you make an offering price at the market price for stock which is available, also known as a market order, you will likely receive an instant acceptance of your offer, and the stock will be transferred into your brokerage account while the funds will be transferred to the seller. At this point you will also be charged a broker’s fee for the transaction.
Purchase a mutual fund containing the stock you wish to buy. A mutual fund is a collection of stocks bundled into a single instrument. By purchasing the fund you purchase a share in all the stocks contained in the fund. This is also done through the broker who will charge you a brokerage fee.
Acquire the shares directly from the company issuing the shares. Companies may offer shares by direct public offerings that can be purchased without a broker’s intervention.
Compare brokerage rates against brokerage service offerings to find one that offers you the services you need at a price you’re comfortable with per transaction made.
Many brokerages charge fees for the additional services offered. Make sure you know the hidden fees before using anything more than basic buy/sell services.
- CNNMoney.com: How to Buy Stocks; Jean Chatzky
- MSN Money: Investing 101: Buy Your First Stock or Fund; Harry Domash
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- Compare brokerage rates against brokerage service offerings to find one that offers you the services you need at a price you're comfortable with per transaction made.
- Many brokerages charge fees for the additional services offered. Make sure you know the hidden fees before using anything more than basic buy/sell services.
Larry Simmons is a freelance writer and expert in the fusion of computer technology and business. He has a B.S. in economics, an M.S. in information systems, an M.S. in communications technology, as well as significant work towards an M.B.A. in finance. He's published several hundred articles with Demand Studios.