![](https://blog-mint-com-prelaunch.go-vip.net/wp-content/uploads/2022/03/mint-mobile-cta-intuit-logo.png?w=260)
Save more, spend smarter, get more out of your money
Stocks are an important part of any investment portfolio. It offers a relatively high average rate of return compared to other investments. In fact, from 1928 to 2021, the average return of the S&P 500 was about twice that of bonds and three times that of real estate (11.94%, 6.21%, 4.4% respectively).
Buying stocks may seem confusing if you’ve never bought them before, but it doesn’t have to be. Here’s how to buy stocks in 5 easy steps.
table of contents
- Open an account and buy shares
- Decide how much to invest
- research stocks to buy
- Order
- Portfolio tracking and management
1. Open an account to buy shares
Buying stocks almost always requires a brokerage account. A brokerage account is similar to a bank account. This is where financial institutions let you manage your money on your behalf. The big difference is that a brokerage account doesn’t just hold your money, it invests on your behalf and helps your money grow.
How a brokerage account invests your money depends on the type of brokerage firm you use and your preferences.
full service brokerage
Full-service brokerage firms offer a variety of financial services, including:
- retirement plan
- tax preparation
- real estate planning
- Stock market investment
At full-service brokerages, human brokers will ask you about your investment style, including your goals, risk preferences, and investment planning horizons. Your answers to these questions will tell you how your brokerage invests your money. Some, but not all, brokerage accounts allow you to directly select the stocks and securities you want to invest in.
Full-service brokerage firms offer adequate financial assistance, but usually charge higher fees.
Robo-advisor account
If you don’t need any additional financial services other than buying shares, we recommend opening a robo-advisor account through services such as: improvementThese accounts are not operated by human brokers. Instead, automated surveys ask questions about investment preferences and use clever algorithms to find investment opportunities that match them.
These accounts are typically less expensive than full-service brokerages, but they may offer less customized support.
If you want the benefits of a full-service brokerage firm and some of the advantages of a robo-advisor account, you can opt for a hybrid brokerage firm. Some of these brokerage firms use human financial advisors and some use robo-advisors.
Stock Direct Purchase Plan
In most cases, investing in the stock market requires opening a brokerage account. However, if you know the stocks you want to invest in, you may be able to purchase them through a direct stock purchase plan rather than through a brokerage account.
A direct stock purchase plan allows you to purchase stock directly from a company or its brokerage, rather than through an investment account. Not all companies participate in direct stock purchase schemes.
Unlike most online brokerage accounts, direct stock purchase plans typically charge a commission when you buy or sell stocks. This tends to make it a less popular option. However, a direct share purchase plan may allow investors to purchase shares at a slight discount, which can help compensate for the additional fees.
2. Decide how much to invest
After opening an account to buy stocks, the next step is to decide how much to invest. Both initial investment costs and long-term budgets should be considered.
- Initial investment cost: This figure includes setup fees associated with brokerage or direct stock purchase plans, as well as the initial investment amount. This can be made larger or smaller as needed.
- Long-term investment budget: This number includes the amount you want to invest each month or year to grow your investment portfolio. If you have specific financial goals, you can use Mint’s Investment Calculator to estimate how your monthly contribution will affect your overall bottom line.
Consider using dollar cost averaging when investing over time. This strategy involves investing equal amounts at regular intervals to average out buy-in costs.
3. Research stocks to buy
Once you’ve decided how much to invest in both your initial and long-term investments, the next step is to research which stocks to buy.
With so many different types of stocks out there, knowing which stocks to invest in can be overwhelming. It helps you start with the basics. In general, there are three ways to invest in stocks:
- Individual stock: Purchasing individual shares allows individual investors to acquire a fixed amount of shares in a company. For example, if he buys 100 shares of Coca-Cola stock, he owns part of the company and gets financial benefits if the company grows.
- Funding: A fund pools money from multiple investors to buy a series of investments such as bonds, stocks, or even real estate. By investing in a mutual fund-like fund, individual investors buy a small portion of a shared investment portfolio. This means owning a small portion of a series of investments.
- Fractional shares: Fractional shares represent a portion of the total stock. Investing in odd stocks can benefit investors who want to invest in expensive stocks but don’t have the capital to do so. For example, as of early October 2022, Warren’s investment in Buffett’s Berkshire and his Hathaway cost him over $400,000. Fractional shares allow investors to invest in Berkshire Hathaway at a lower cost for a portion of the shares without the required upfront capital.
Preferred stock can be a low-risk investment if you’re not yet sure how you want to invest.
4. Order
Once you have decided how much to invest and where to invest, you are ready to place your order. You must specify the order type. There are several types of orders, but generally the two most common order types are:
- Market order: These orders direct stockbrokers to buy specified stocks immediately at the lowest available price. Please note that the price displayed when you place an order may differ from the price you actually pay. Stock market prices change in seconds.
- Limit orders: These orders give you more control over your buy-in price by setting a limit on how much you can pay for a particular stock. A stockbroker will only buy shares if they become available at a specified price or less within a specified period of time. If the inventory does not match your specifications, the order will not go through.
In general, market orders are best suited for long-term investors who intend to buy and hold and small fluctuations in price are not an issue. Limit orders are generally best for buying stocks whose prices fluctuate widely to ensure that investors are paying a price they are comfortable with. This may involve buying in more volatile markets.
5. Portfolio tracking and management
After buying stocks, track your investment portfolio to make sure it’s aligned with your risk appetite and financial goals. While you may not need to monitor your investments every day, it’s especially important to review your investments when your financial situation or goals change.
Moreover, buying stocks is just one part of a larger investment strategy. After investing in stocks, you may want to consider different types of investments such as bonds, CDs, or annuities. This allows you to create a more diverse portfolio.
Having multiple accounts, such as a brokerage account and a retirement account, can make managing your investment portfolio overwhelming. Mint makes this easy by letting you track your investments all in one place. Performance tracking integration lets you see what your best and worst performing investments are so you can make more informed investment decisions.
Stock Purchase FAQ
Still have questions about buying stocks? Here are answers to frequently asked questions.
How old do you have to be to buy stocks?
In the United States, you must be at least 18 years old to make investments such as stocks and mutual funds. If you’re under 18 and want to start investing, your parent can set up a custody account for you.
What are the best stocks for beginners to buy?
Some of the best stocks for beginners to buy are:
- Dividend stock: Dividends are regular payments to investors who hold shares in a company.Dividend-paying stocks outperform non-dividend stocks on average, based on historical returns 9.6% against 4.79% of unpaid shares.
- Preferred stock: These shares provide dividends to preferred shareholders. Common shareholders receive payments from the remaining dividends.
- large company: Large, established companies can be a safe investment as they have a proven track record and are usually in demand.
How can I buy company stock?
If the company is public, you can buy shares on the stock market. This includes opening a brokerage account, funding the account, and placing orders through a stockbroker.
Private companies can still invest by joining an angel investment organization or partnering with a venture capital fund. Investing directly in a company is also possible, but this strategy is usually restricted to wealthy individuals who can handle more risk.
Do I have to pay taxes on the profits I make from the shares?
You will have to pay capital gains tax on any gains you make from selling your shares. How much capital gains tax you have to pay depends on your tax coverage, the price difference between when you bought and when you sold, and how long you held the shares before you sold them. Dividends are also taxable.
- long term capital gain Applies to shares held for more than one year. Tax rates are 0%, 15% or 20% depending on income and declaration status.
- short term capital gain Applies to stocks held for less than one year. It is taxed at the same tax rate as the income tax category.
Ready to start investing? Open a brokerage account today with one of our trusted partners or learn more about how the stock market works.
sourcing
![](https://blog-mint-com-prelaunch.go-vip.net/wp-content/uploads/2022/03/mint-mobile-cta-intuit-logo.png?w=260)
Save more, spend smarter, get more out of your money
-
previous post
What is real estate wholesale?
-
next post
15 Best Investments for 2023