How to Invest in Stocks as a Beginner

by Neil Kokemuller ; Updated July 27, 2017

You have two basic options to begin investing in stocks. One is the traditional route of selecting a personal broker and entrusting him to manage your portfolio. The other is to utilize one of many online self-service brokerage firms available as of 2015.

Registration and Fees

With a face-to-face broker, the first step is to set up an account. You can do this in an office or electronically, depending on the broker's location. After the account is in place and funded, you direct the broker on the types and quantity of stocks you want to buy. Financial services firms, investment firms and traditional banks can help establish self-managed online accounts. Apply online through the company's website, and then fund the account electronically.

A primary difference between using a face-to-face broker and managing your own account is the fees. According to the Wall Street Journal, the commissions you pay traditional brokers are much higher than what you pay online. This fee differential is based on the added personal support brokers provide. With self-managed accounts, you are in charge of your own research and transactions. Some banks allocate a number of free trades to bank customers with sizable accounts.

Warnings

Funding Your Account

Traditional brokerage firms often have minimum initial deposits of $50,000 or more as of 2015, according to NASDAQ. However, you can begin investing with a discount online broker with as little as $1,000. Some online firms even invite people to sign up with no official minimum opening deposit.

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Completing Transactions

With a personal broker, you communicate your intentions and the broker executes the transactions. With a self-managed account, you execute your own trades. Specific platforms vary, but the typical purchase order requires the stock symbol, number of shares desired, and whether you want a market or limit order. A market order executes right away if the funds are available. A limit order means you will buy the stock when it reaches a certain price. To sell shares you currently hold, enter the name of the stock and the amount to sell. Some trading tools allow you to click a "Sell" button directly from your portfolio.

Selecting a Strategy

Before investing significantly in real stocks, do research and select an investment strategy. Some people buy blue-chip or reputable stocks and hold them for a long time. Others trade quickly to profit on short-term momentum. MarketWatch points out some common traps for new investors, including getting in too late on rising shares, buying shares at peak prices and investing with your heart. Even self-managed account investors have access to numerous research tools and company reports for use in selecting discounted shares with high risk-to-reward potential.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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