How to Buy Stocks: Step-by-Step Guide for Beginners [2022]

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In today’s post, I’m going to show you exactly how to buy stocks in a simple and proven step-by-step guide.

So, if you want to:

Then you’ll love this new guide.

Let’s get started.

Sneak Peek: Best Investing Platforms


Best for Beginner Investors
👇

Best for Intermediate Investors 👇

Best for Stock Analysis 👇

Buying stocks online isn’t as difficult as you may think.

Here’s what you’ll have to do:

How to Buy Stock for Beginners

Let’s kick things off with step #1:

select a stock trading platform

Step #1: Select a Stock Trading Platform


The most straightforward way to buy stocks is to select a platform that lets you trade stocks.

One of the top investing platforms for beginners is Acorns 👇

If you’re an intermediate or more advanced investor, then check out M1 Finance 👇

I’ve personally invested with both platforms, which is why I am able to direct beginner investors and intermediate investors to the 2 above. 

There are 2 types of accounts you can open:

  • Tax-advantaged
  • Non-tax advantaged

Typically, you can fund the account either by check or by an electronic fund transfer (EFT). 

The popular option is using an EFT. 

If you decide to fund your investment app with an EFT, here’s what you have to do:

  • Include the details of your bank account
  • Link your bank account with your investment account
  • Send money from your bank to your investment account

It will typically take 1 to 3 business days for processing your electronic fund transfer before your money hits the bank and you can start investing. 

research the stocks you want to buy

Step #2: Research the Stocks you want to Buy


There are quite literally 1,000’s of stocks out there to choose from, so it’s no easy task to research what stocks you want to buy.

Below are some of the many different types of stocks:

Type of Stock Definition

Growth Stock

Shares of a company with rapid (although sometimes volatile) growth

Value Stock

Shares of a company that are underpriced now but will likely increase in value over time

Dividend Stock

Shares of a company that pay out a steady income stream (a portion of its profits) to investors in the form of dividends

A good rule of thumb is to research companies that you buy from often. 

Invest in what is familiar.

If you want to save time and money when it comes to picking stocks then check out Seeking Alpha 👇

Seeking Alpha is a subscription service that offers stock analysis, investor tools and lots more.

Recommended Reading: Seeking Alpha Review

M1 Finance also offers many different stock options but makes it easy for you, the investor, because the app already prepares your investment portfolio for you, as pictured below.

There is another way to invest in the stock market…

…And that’s through index investing.

For beginners (and quite frankly also for advanced investors), index investing might be the best long-term investment strategy.

With an index fund, you invest in 1 single fund, which in turn invests your money into 100’s, if not 1,000’s, of different stocks within that index.

Below are some pros and cons of index funds:

Index Investing Pros Index Investing Cons

Lower risk

Little flexibility

Consistent growth

No large gains in the short term

Low fees

Cannot outperform the market

Diversification

You’re not in control

Remember: You will likely see higher rates of return in the long run.

“Our favorite holding period is forever” – Warren Buffett

Warren Buffett, the 6th wealthiest man in the world, has followed this investment advice – to hold for the long-term – and it appears that advice has worked well for him.

Next, it’s time to decide how many shares you can buy.

decide how many shares to buy

Step #3: Decide how many Shares to Buy


Now that you have had some time to think about the type of stock (or index fund) that you want to invest in, it’s time to think about how many shares you want (and can) buy.

Vanguard is a fantastic option to start investing – but one of the downsides of the investment platform is that it may not allow you to start investing with as little as $5.

Acorns, on the other hand, permits you to start investing with as little as $5, thanks to what is known as fractional share investing. 

Here’s an example:

  • 1 share of Amazon costs $3,383.87 (in June of 2021)

If you didn’t have fractional investing, you would have to pay $3,383.87 to buy 1 share of Amazon. 

Yikes. 

With fractional investing, however, you can still become a fractional owner of Amazon with your $5 investment. 

You’ll just own a tiny percentage of that original stock.

dollar cost average your purchases

Step #4: Dollar Cost Average your Purchases


The next step to buy stocks online is to consider starting a 
dollar cost averaging strategy.

The DCA strategy doesn’t care whether the markets are high or low, the DCA strategy is automatic and continues investing, regardless of what’s happening to the economy.

It works in the long term.

Why does the dollar cost averaging strategy work?

  • It’s consistent
  • It’s automatic
  • It removes emotion

If your goal is to build wealth over time, then this is a key strategy you should integrate into your investment plan. 

Whether you use M1 Finance, Vanguard, Acorns, or another online broker, automating your investments with the DCA strategy is how you can build wealth in the long run.

invest for the long term

Step #5: Invest for the Long Term


Being an investor 
is not easy. 

Investing can take an emotional and psychological toll on you. 

The reason why investing takes such a toll on most investors is because investors start seeing their hard-earned money move with the market swings.

It’s always easier to see someone else’s money fluctuate with the market. 

So what happens when there are market fluctuations?

What would you do if you saw something like this happen to your portfolio:

S&P 500 dip march 13 2020

Source: Google Finance

If you answered “sell, sell, sell!” then it’s probably a good idea that you have the DCA strategy working for you – because the DCA strategy is automatic.

Even better: With the DCA strategy, you don’t have to make decisions.

You just sit back, believe in your investment strategy, and know that you’ve invested for the long term. 

Remember this:

  • Focus on the long-term
  • Focus on what you can control
  • Don’t worry about what you can’t control

When you focus on the long-term, there is a 99% chance that you’ll see your investments increase in value.

The chart from above was from the COVID-19 market crash in March of 2020. 

Fast forward 1 year later, and the markets are reaching all-time highs, as illustrated below:

S&P 500 2020 to 2021

Source: Google Finance

The key is to focus on the long-term, not on the short term.

Your bank accounts will thank me later.

FAQs

You can start investing with as little as $5 when you open an investment account with Acorns. You don’t need $1,000’s or $100’s to start investing. 

The most important thing to remember is to invest today for the future. 

Time is the most critical aspect when it comes to buying stocks, so don’t waste your time and not buy stocks today.

6 actionable steps beginners can take today to buy stocks online:

  • Select a trading platform
  • Research the stocks you want to buy
  • Decide how many shares to buy
  • Dollar cost average your purchases
  • Optimize your stock portfolio
  • Remember you’re invested for the long term

Most importantly, don’t procrastinate. 

Start investing today. Your bank accounts will thank me tomorrow.

$100 is enough to buy stocks. In fact, you can start buying stocks with as little as $5. Thanks to fractional investing, you don’t need $100’s or even $1,000’s to open investment accounts. 

With your $5 investment, you could open accounts including:

  • SEP IRAs
  • Roth IRAs
  • Traditional IRAs
  • Individual accounts
  • UTMA/UGMAs for kids

As you can see, there are many options that a $5 investment with Acorns can offer you.

While buying individual stock shares is an investing strategy (and it’s recommended to invest in about 15 to 30 different companies to properly diversify your portfolio), as a beginner, it likely makes more sense to invest in index funds.

With an index fund, you simply buy 1 fund, which in turn would invest in 100’s or even 1,000’s of different companies for you. 

The index fund does not seek to outperform the market; it just tracks its index.

If you’re focused on long-term investing, then you shouldn’t aim to time the market. 

Instead, just focus on what’s truly important: Investing today, maintaining a long-term focus, and consistently investing into the future. 

Yes, for everyday purposes, stocks and shares are virtually the same. 

Lawyers may see a distinction between the 2 terms, however. 

If you want to get into the technical aspect: Stocks are divided into shares, where shares are the smallest value of a company’s stock.

If you’ve heard of the terms A shares, B shares, etc., then you’re familiar with the term “share” over the term “stock.”

How to Buy Stocks: The Bottom Line


The most important thing I want you to take away from this reading is this:

  • Invest early
  • Invest consistently
  • Invest for the long-term

Stop making excuses that you’re not earning enough money to invest in the stock market or that you’ll start tomorrow (which you probably won’t). 

Why not start now? 

The M1 Finance App (for those who can afford to invest more and are a little more comfortable with investing) and the Acorns App (for those who are beginners and have a minimum $5 to invest) are making investing easy.

You don’t need to hire an investment manager anymore. The investment apps do the hard work for you. 

I started my investing journey when I was 19 years old. 

Although 19 may be early for some, I wish I had started even earlier to allow my money to grow through the power of compound interest.

If you want to find financial freedom, start by investing today.

Your bank accounts will thank me later.

How do you plan to invest your money? Let me know in the comments, below.

Fiona Smith
Fiona Smith
Fiona Smith is the founder of The Millennial Money Woman. She holds her Master of Science Degree in Personal Financial Planning, has advised decamillionaires for 6 years in the corporate wealth management sector and has co-founded a local non-profit community teaching financial literacy. She is the author of the personal finance book How to Get Rich from Nothing and her work is featured on Forbes and FinCon.

12 thoughts on “How to Buy Stocks: Step-by-Step Guide for Beginners [2022]”

  1. Very interesting. Exactly what I have been longing for. Needed to buy stock but lack knowledge and how to go about it and who to trust in this world of Internet fraud.

    1. I’m so glad to hear this guide helped you! Thanks for sharing 🙂
      And I completely understand; It’s not easy to trust people these days, especially when it comes to investing your own, hard-earned money.

      Good luck on your journey!

      Fiona

  2. Hi Fiona,
    Unfortunately, M1 Finance is not available for people outside the US.
    Would you have any recommendations for Europeans? Etoro?
    Thanks!
    Gregory

    1. Hi Gregory,

      Thanks for your comment!
      I think you bring up a great point – regarding cross-border investing apps.
      Yes, eToro should work in Europe. I would also check with other, larger investment platforms/WireHosues like Charles Schwab and/or Fidelity.

      Hopefully this helps!

      Cheers,

      Fiona

  3. Hi Fiona,
    I have followed you for about a year now and I must confess your writeups are very insightful.
    Can you take me through how to invest in US as an international investor from outside US?
    Thank you.
    Bukola

    1. Hi Bukola,

      Thank you so much for your kind words!
      I’m glad to hear the articles help you 🙂

      You certainly bring up a good point in that it’s not always easy to invest in US asset classes if you’re an international investor. Fortunately, there are some investment platforms that should help foreign investors gain some access, such as eToro. Other, larger investment platforms and/or WireHouses like Fidelity and/or Charles Schwab could be another option to consider. Of course, it also depends on your location in the world, which may or may not restrict you in your investments. However, if I were you, I’d probably start with eToro, Fidelity, or Charles Schwab. Even if you are investing from abroad, you should theoretically have the ability to invest in US-based investments.

      Hopefully this helps!

      Cheers,

      Fiona

  4. Hello Fiona – What is the difference between an ETF (Exchange Traded Fund) and an IF (Index Fund), and can you give good comparable examples of each? Thanks.

    1. Hey there!

      That’s a great question.
      In general, you can think of an index fund as a fund that is specifically designed to track an index (like the S&P 500 index, which happens to be my favorite index!). In other words, an index fund doesn’t seek to outperform the index – just to track it. An index fund can typically either be an ETF fund or a mutual fund. If an index fund is an ETF (like SPY, an ETF tracking the S&P 500), then that index fund can be traded during the day, just like stocks. However, if an index fund were an index mutual fund (like SWPPX, a Charles Schwab based mutual fund also tracking the S&P 500), then you could only trade that fund at the end of each trading day (which is just a typical characteristic of mutual funds). Generally speaking, ETFs are cheaper than mutual funds (just check out the expense ratios of ETFs vs. mutual funds, and you’ll typically see a difference there). Personally speaking, I’m invested in both mutual index funds and index ETFs. In the end, it really just comes down to your personal investing style.

      Hope this helps!

      Cheers,

      Fiona

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