You buy shares in a company by opening a brokerage account, depositing money, and placing an order for the stock you want. The entire process can be done online in under an hour, and most major brokers charge $0 in trading commissions for U.S. stocks. Here’s how each step works and what you need to know before placing your first trade.
Open a Brokerage Account
A brokerage account is the most common way to buy shares. Think of it like a bank account, but instead of holding just cash, it holds your investments. You can open one online at firms like Fidelity, Charles Schwab, Interactive Brokers, Vanguard, or SoFi, among others. Most have no minimum deposit requirement to get started.
To open the account, you’ll need to provide:
- Your name, date of birth, and Social Security number
- A government-issued ID (driver’s license or passport)
- Your address, phone number, and email
- Employment status and annual income
- Your net worth and investment experience
- A trusted contact person (someone the broker can reach in case of concerns about your account)
Brokers ask about your income, net worth, and investment experience because federal regulations require them to understand your financial situation. This information helps determine which types of investments and account features you’re eligible for, but it won’t prevent you from buying ordinary shares of stock. Most accounts are approved within one to three business days.
Fund Your Account
Once your account is approved, link a checking or savings account and transfer money in. Most brokers accept ACH transfers (which are free but take one to three business days) or wire transfers (which arrive the same day but often carry a fee of $15 to $25). Some brokers let you start trading immediately on a portion of your pending transfer, even before the funds fully settle.
You don’t need thousands of dollars to get started. Many brokers let you buy fractional shares, meaning you can own a slice of a company’s stock for as little as $1 or $5. Charles Schwab, for example, lets you buy fractional shares of any S&P 500 stock for as little as $5. Fidelity, Interactive Brokers, SoFi, and Public also offer fractional shares with $0 commissions. This makes it possible to invest in companies whose full share price might be $200 or $500 without needing that much cash upfront.
Find the Stock You Want to Buy
Every publicly traded company has a ticker symbol, a short abbreviation used to identify it on the stock exchange. Apple trades under AAPL, for instance. You can search by company name or ticker symbol in your broker’s platform. Before buying, you’ll see key details like the current share price, the day’s price range, and trading volume.
Take a few minutes to review the company’s fundamentals. Your broker’s platform will typically show you earnings reports, revenue figures, the price-to-earnings ratio (which tells you how much investors are paying per dollar of the company’s profit), and analyst ratings. None of this guarantees future performance, but it gives you a baseline understanding of what you’re buying.
Place Your Order
When you’re ready to buy, you’ll choose the number of shares (or dollar amount, if buying fractional shares) and select an order type. The three most common are:
- Market order: Buys shares immediately at whatever the current price is. This guarantees your order goes through but not the exact price you’ll pay. For heavily traded stocks, the price you get will be very close to what you saw on screen. For thinly traded stocks, there can be a gap.
- Limit order: Lets you set the maximum price you’re willing to pay. If you want shares of a company but only at $50 or less, a limit order ensures you won’t pay more than that. The trade only goes through if the stock hits your price, so it might not execute right away, or at all.
- Stop-loss order: Used mainly after you already own shares. You set a price below the current market value, and if the stock drops to that level, the order automatically triggers a sale. This is a way to limit losses if a stock declines while you’re not watching.
For most beginners buying well-known stocks during regular market hours (9:30 a.m. to 4:00 p.m. Eastern, Monday through Friday), a market order works fine. If you’re buying a less liquid stock or want more control over your price, use a limit order.
After you submit the order, you’ll get a confirmation showing the number of shares purchased, the price per share, and any fees. With the major online brokers, commission fees for U.S. stock trades are $0.
Buying Directly From a Company
Some large publicly traded companies offer direct stock purchase plans (DSPPs), which let you buy shares straight from the company without using a broker. You enroll through the company’s investor relations page or its plan administrator, link a bank account, and set up recurring deposits. The plan pools your money and buys shares (or fractional shares) on a regular schedule, often monthly.
Minimum initial investments for DSPPs typically range from $100 to $500. Some plans have no fees, while others charge a small one-time enrollment fee and per-transaction costs. If the company pays dividends, you can usually reinvest them automatically through a dividend reinvestment plan (DRIP), which buys additional shares with your dividend payments.
The main downside is liquidity. Selling shares held in a DSPP is slower and less flexible than selling through a brokerage account. You generally can’t place a limit order or sell instantly at a specific price. For most people, a brokerage account offers more convenience and control, but DSPPs can be a good fit if you want to steadily accumulate shares of a single company over time.
Choosing the Right Account Type
Where you hold your shares affects how they’re taxed. The two broad categories are taxable brokerage accounts and tax-advantaged retirement accounts.
In a standard taxable brokerage account, you owe taxes on two things: capital gains (profit when you sell shares for more than you paid) and dividends (cash payments some companies distribute to shareholders). If you hold shares for more than one year before selling, your profit is taxed at the long-term capital gains rate of 0%, 15%, or 20%, depending on your income. Sell before the one-year mark, and your profit is taxed at your ordinary income tax rate, which is usually higher. Dividends are also taxable in the year you receive them, even if you reinvest them automatically.
Tax-advantaged accounts like a traditional IRA or Roth IRA let your investments grow without annual tax drag. With a traditional IRA, contributions may reduce your taxable income now, but withdrawals in retirement are taxed as ordinary income. With a Roth IRA, you contribute money you’ve already paid taxes on, but qualified withdrawals in retirement are completely tax-free. If you’re investing for retirement and want to buy individual stocks, many brokers let you do so inside an IRA.
What Happens After You Buy
Once your order executes, the shares appear in your account. Stock trades in the U.S. settle on a T+1 basis, meaning the transaction officially finalizes one business day after you place the trade. As a practical matter, you’ll see the shares in your portfolio almost immediately, and you can sell them the next trading day if you choose.
You now own a small piece of the company. If the company pays dividends, they’ll be deposited into your account on the payment dates. You can monitor the stock’s performance through your broker’s app or website, buy more shares over time, or sell whenever you decide. There’s no obligation to hold for any specific period, though holding longer than a year gives you the more favorable long-term capital gains tax rate if you sell at a profit.