Buying a stock — especially that first time you become a bona fide part owner of a business — deserves its own celebratory ritual. Opening a brokerage account is as easy as setting up a bank account: You complete an account application, provide proof of identification and choose how you want to fund the account. You may fund your account by mailing a check or transferring funds electronically. Paying a few bucks more per trade at a brokerage that provides high-quality customer service is worth it, especially at the start of your investing journey.
Investors who trade individual stocks and advanced securities like options are looking for exposure to specific companies or trading strategies.
Mutual funds and ETFs are typically best suited to investing for long-term goals that are at least 5 years away, like retirement, a far-off home purchase or college. Beginners and long term investors often look to get exposure to whole markets and don't have a preference on which type of securities to trade. Some brokers have minimum deposit requirements, while others may require a minimum balance to access certain advanced features or trading platforms.
If a broker is offering a new account promotion, there may be a minimum initial deposit requirement to qualify. If you're trading frequently — more than weekly — you'll want an advanced broker that has powerful platforms, innovative tools, high-quality research and low commissions. Those who trade monthly or yearly will want a well-rounded broker with a user-friendly interface, helpful customer support and competitive pricing.
Robo-advisor services use algorithms to build and manage investor portfolios. For a very low fee, they'll create a portfolio of ETFs based on your investing goals and risk tolerance, then rebalance it as needed.
Many also offer tax-loss harvesting for taxable accounts. If that sounds too hands-off for you and you want to manage your own investments , choose a self-directed account at an online broker. If you plan to trade frequently, you likely know what kind of tools you'll use most and what you want out of a platform. Tools should be intuitive and easy to navigate. Investing, particularly frequent trading, requires analysis. The broker should provide extensive information to help you select the investments for your portfolio.
A good place to start is by researching companies you already know from your experiences as a consumer. Keep the objective simple: Most brokers also provide tutorials on how to use their tools and even basic seminars on how to pick stocks.
You should feel absolutely no pressure to buy a certain number of shares or fill your entire portfolio position in a stock all at once. You can add to your position over time as you master the shareholder swagger.
Refer to this cheat sheet:. There are a lot more fancy trading moves and complex order types. Bid and ask prices fluctuate constantly throughout the day.
A limit order gives you more control over the price at which your trade is executed. On the selling side, a limit order tells your broker to part with the shares once the bid rises to the level you set. Limit orders are a good tool for investors buying and selling smaller company stocks, which tend to experience wider spreads, depending on investor activity. There are additional conditions you can place on a limit order to control how long the order will remain open.
We hope your first stock purchase marks the beginning of a lifelong journey of successful investing. But if things turn difficult, remember that every investor — even Warren Buffett — goes through rough patches. The key to coming out ahead in the long term is to keep your perspective and concentrate on the things that you can control.
What you can do is:. Dayana Yochim is a staff writer at NerdWallet, a personal finance website: Get the best broker recommendation for you by selecting your preferences Investment Type Step 1 of 5. What do you want to invest in?
How much will you deposit to open the account? How often will you trade? At least once a week. Every month or so. A few times a year. Who will manage your investments?
What is most important to you? Start with a small position and add to it over time. Decide up front what would make you sell the stock.
Basic stock trading terms Ask For buyers: The price that sellers are willing to accept for the stock. The price that buyers are willing to pay for the stock. Spread The difference between the highest bid price and the lowest ask price. Limit order A request to buy or sell a stock only at a specific price or better.
Stop-limit order When the stop price is reached, the trade turns into a limit order and is filled up to the point where specified price limits can be met. See the Best Online Trading Platforms. See the Best Brokers for Beginners. We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelines , and avoid disclosing personal or sensitive information such as bank account or phone numbers.
Any comments posted under NerdWallet's official account are not reviewed or endorsed by representatives of financial institutions affiliated with the reviewed products, unless explicitly stated otherwise. When the stop price is reached, the trade turns into a limit order and is filled up to the point where specified price limits can be met.More...