Easiest Way to Buy Stocks

••• young woman making an online purchase image by Paul Hill from Fotolia.com

Deciding which stock to buy and how to eventually get out of it may be the hardest parts about stock ownership, because brokerage firms have made the process of buying a stock online almost as easy as purchasing any other item online. In addition, not only have brokerage firms simplified the process of opening and funding your account, most have also lowered trade commissions, so you should expect to pay no more than $10 in trading costs for your stock trade.

Research the stock that you wish to purchase if you do not already have a stock in mind. Your brokerage firm's research site should offer online education, tools and even stock lists to help you with this decision, so be sure to take advantage of these options.

Navigate to the online account's stock trading page and enter the symbol of the stock that you wish to purchase. Most firms will only allow you to place one stock trade at a time unless you qualify for active trader tools.

Enter the number of shares that you wish to purchase. Bear in mind that you must buy in shares, not in dollars, so double-check your math before submitting your order. Most trading sites will give you an estimate of the amount you can expect to spend based on the most recent market price of the stock.

Determine whether you will add any qualifiers to your order. For example, you could enter a "limit or better" price, indicating the maximum price you will spend per share, in which case your trade order will not execute until and unless your limit is reached. If you have questions about any of the order qualifiers listed on the trading page, look for "information" symbols or footnotes at the bottom of the page. Most trading pages will provide a brief explanation about each order qualifier.

Determine whether you want stock dividends to be reinvested into new shares of the stock, bearing in mind that not all stocks pay dividends. Look for a check box or radio button on the trading page allowing you to choose dividend reinvestment.

Follow the steps listed on the trading page to review and submit your trade order. If you place an order with no qualifiers during regular market hours, your order will likely execute immediately.

Visit the order status page to confirm that your order was received. You should also be able to see whether it has executed.

Plan your exit strategy now. Even if you plan to hold this stock over many years, you might want to think through the circumstances under which you would sell your shares and at what price. Researchers of behavioral economics have long noted people's unwillingness to sell a losing stock, so take the emotion out of the sell decision when you buy.

Monitor your stock on a regular basis so that you can implement your exit strategy quickly if circumstances warrant.

Tips

  • Consider the use of broad-based Exchange-Traded Funds (ETFs) instead of stocks to broaden your diversification.

    Check to see if your brokerage firm offers instructor-led courses about trading and investing. Most firms offer these types of courses to their clients at no cost in order to boost loyalty and encourage trading.

Warnings

  • Be sure to add the commission costs to any calculation of profit or loss.

    Trading stocks is risky and you can lose money.