You need a brokerage account, money to invest, and a decision about what stocks to buy

To buy stocks, you open an account with a brokerage firm — a company licensed to buy and sell securities on your behalf. You deposit money into that account, then use it to place orders for specific stocks. The brokerage executes the trade, holds the shares in your name, and sends you statements showing what you own and what it is worth.

The process itself takes minutes once your account is open. The harder part is deciding which stocks to buy and how much money to risk. Most beginners start by opening an account with a major brokerage, funding it with money they can afford to lose, and either buying individual stocks or funds that hold many stocks at once.

You do not need a large amount to start. Many brokerages have no minimum deposit requirement, though some funds or investment strategies may have their own minimums. You can begin with whatever amount feels right for your situation.

Key Takeaways

  • You must open a brokerage account with a licensed firm before you can buy any stocks, and this account holds your shares and cash.
  • Most major brokerages charge no commission on stock trades, though some funds or account types may have fees you should review before opening.
  • You can buy individual company stocks or funds that hold many stocks, and funds are often simpler for beginners because they spread your risk across dozens or hundreds of companies.
  • Your brokerage will ask for your Social Security number, address, and employment information to verify your identity and meet federal requirements.
  • Money in a regular brokerage account is not insured by the government, but most brokerages carry insurance through the Securities Investor Protection Corporation (SIPC) that covers up to $500,000 per account.

Opening a brokerage account

Choose a brokerage and visit their website or app to start an account. Major brokerages include Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Robinhood, and Webull, among many others. Each has different features, fees, and tools, so you may want to compare a few before deciding.

The account opening process asks for your name, address, date of birth, Social Security number, and employment information. The brokerage uses this to verify your identity and comply with federal anti-money-laundering rules. You will also choose a username and password, and decide whether you want a regular taxable account or a retirement account like an IRA.

For a first-time investor, a regular taxable brokerage account is usually the simplest choice. It has no contribution limits, no age restrictions on withdrawals, and no special tax rules — though you will owe taxes on any gains when you sell.

Once your account is approved (usually within one business day), you can deposit money by linking a bank account, transferring funds electronically, or mailing a check. The money sits in your account as cash until you place a trade.

Deciding between individual stocks and funds

An individual stock is a share of one company. When you buy Apple stock, you own a tiny piece of Apple. If you buy 10 different company stocks, you own 10 separate pieces of 10 companies. Individual stocks can rise or fall sharply based on that one company's performance.

A fund is a collection of many stocks (or bonds, or both) bundled together. When you buy one share of a fund, you own a small piece of every stock in that fund. For example, an S&P 500 index fund holds shares in 500 large U.S. companies, so one purchase gives you exposure to all 500. If one company in the fund drops, the impact on your overall investment is small because you own 499 others.

Beginners often find funds less stressful because the risk is spread across many companies. You do not have to research individual companies or time your trades. You also do not have to pick winners — you own the whole market or a large slice of it. Individual stocks require more research and carry more risk if you pick wrong, but they also let you bet on companies you believe in.

Many beginners use both: a core holding in a broad index fund for stability, plus a few individual stocks in companies they understand or follow closely.

Understanding fees and costs

Most major brokerages charge zero commission on stock trades, meaning you pay nothing to buy or sell a stock. This was not always true — commission fees used to be $5 to $10 per trade — but competition has driven them to zero for most investors.

However, other costs may explore. Funds charge an annual expense ratio, a small percentage of your investment that goes to the fund manager. A low-cost index fund might charge 0.03% per year, while an actively managed fund might charge 0.5% to 1% or more. Over decades, this difference compounds significantly.

Some brokerages charge account maintenance fees, inactivity fees, or fees for certain services like wire transfers or paper statements. Read the fee schedule before opening an account. Most brokerages waive these fees if you meet minimum balance or activity requirements.

You will also owe taxes on any gains when you sell. If you hold a stock for more than one year before selling, the gain is taxed at the long-term capital gains rate, which is usually lower than your regular income tax rate. If you hold it for one year or less, it is taxed as ordinary income.

Placing your first trade

Once your account is funded, log into your brokerage and look for a "Trade" or "Buy" button. You will enter the stock symbol (a short code like AAPL for Apple or MSFT for Microsoft), the number of shares you want, and the type of order.

A market order buys the stock at whatever price it is trading at right now. It executes when ready during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), but you do not know the exact price until the trade is done.

A limit order lets you set a maximum price you are willing to pay. If the stock is trading at $50 and you set a limit order for $48, the order will only execute if the price drops to $48 or lower. This gives you control over price, but the order may never fill if the stock never reaches your price.

For funds, the process is identical — you enter the fund symbol and the number of shares. Funds trade once per day after the market closes, so your order executes at that day's closing price regardless of when you place the order.

Managing risk as a new investor

The stock market rises and falls. Over long periods (10+ years), it has historically trended upward, but in any given year or month it can drop sharply. Money you invest in stocks can lose value, and there is no may provide you will get it back.

Start with money you do not need for at least five years. If you need the money sooner, the stock market is not the right place for it — use a savings account or money market fund instead. This gives your investments time to recover if the market drops right after you buy.

Spread your money across different stocks or funds rather than putting it all in one. This is called diversification. If you own 20 different stocks and one drops 50%, your overall portfolio drops only a small amount. If you own one stock and it drops 50%, you lose half your money.

Avoid the temptation to buy and sell constantly. Every trade can trigger taxes and fees, and research shows that frequent traders underperform the market. Most successful long-term investors buy and hold for years, ignoring short-term price swings.

Tax reporting and record-keeping

Your brokerage sends you a tax statement each January showing all trades you made the previous year, your gains and losses, and dividends you received. You use this information to fill out your tax return.

If you sold stocks at a profit, you owe capital gains tax. If you sold at a loss, you can deduct the loss against other gains or up to $3,000 of ordinary income per year. Keep records of what you paid for each stock and when you bought and sold it — your brokerage provides this, but it is good to keep your own copies.

If your stocks paid dividends (cash payments from the company), you owe tax on those dividends even if you did not sell the stock. Your brokerage reports this on your tax statement.

For retirement accounts like a traditional IRA or 401(k), the tax rules are different — you do not owe tax on gains until you withdraw the money, and some accounts offer tax-free growth. If you are saving for retirement, these accounts usually make more sense than a regular brokerage account.

Frequently Asked Questions

How much money do I need to start investing in stocks?

Most brokerages have no minimum deposit. You can open an account and start with $100, $500, or whatever amount you have. Some funds or investment strategies may have their own minimums, usually $1,000 to $3,000, but these are not required to get your free guide.

Can I lose all my money in the stock market?

Yes, it is possible to lose your entire investment if you buy individual stocks in companies that fail or go bankrupt. This is less likely if you own a diversified fund, because the fund would have to lose value across hundreds of companies at once. This is why spreading your money across many stocks or funds reduces risk.

What is the difference between a stock and a mutual fund?

A stock is a share of one company. A mutual fund is a pool of money from many investors that a manager uses to buy stocks, bonds, or other securities. When you buy a mutual fund, you own a piece of everything in that fund. Index funds are a type of mutual fund that tracks a specific market index like the S&P 500.

Do I have to pay taxes on stocks I own but have not sold?

No. You only owe capital gains tax when you sell a stock at a profit. However, if your stocks pay dividends, you owe tax on the dividend income even if you do not sell. Your brokerage reports all dividends on your tax statement.

Can I buy stocks outside of market hours?

You can place an order anytime, but it will not execute until the market is open (9:30 a.m. to 4 p.m. Eastern time on weekdays). Some brokerages offer after-hours trading, but prices are less stable and spreads are wider, so this is not recommended for beginners.