The basic steps to buy your first stock

To buy stocks, you need a brokerage account — an account with a company that buys and sells stocks on your behalf. You open the account online or at a branch, deposit money, then place an order to buy shares of a specific company. The broker executes the trade and holds the shares in your account. You can sell them later at whatever price the market is trading at that day.

The process takes a few days from start to finish. Opening the account usually takes 10 to 15 minutes online. Depositing money can be when ready (if you link a bank account) or take a few business days (if you mail a check). Once the money is in your account, you can place a buy order when ready, and the trade settles — meaning the shares officially become yours — within two business days.

You do not need a large amount of money to start. Many brokers let you buy fractional shares, meaning you can own a piece of a stock even if the full share costs $500. Some brokers have no minimum account balance at all.

Key Takeaways

  • You must open a brokerage account with a company licensed to buy and sell stocks, which takes 10 to 15 minutes online and requires basic personal information.
  • You can deposit money by linking a bank account (usually when ready) or by mailing a check (usually three to five business days).
  • Once money is in your account, you can place a buy order for any publicly traded stock, and the trade settles within two business days.
  • Fractional shares let you invest smaller amounts — you do not need hundreds of dollars to buy a single share.
  • Different brokers charge different fees for trades, account maintenance, and research tools, so comparing them matters before you open an account.

Choosing a brokerage and opening an account

A brokerage is a company licensed by the Securities and Exchange Commission (SEC) to buy and sell stocks on your behalf. Common brokers include Fidelity, Charles Schwab, E*TRADE, Interactive Brokers, and Robinhood. Each charges different fees, offers different research tools, and has different account minimums (though many have none).

To open an account, you visit the broker's website and fill out a form with your name, address, Social Security number, employment status, and bank account information. The broker verifies your identity — this usually takes a few minutes but can take up to a week if they need additional documents. Once approved, you can log in and deposit money.

You will choose an account type during signup. A taxable brokerage account has no contribution limits and no restrictions on when you withdraw money, but you pay taxes on any gains when you sell. A retirement account like an IRA or 401(k) has contribution limits and withdrawal restrictions, but offers tax advantages. Most people starting out open a taxable account first because it is simpler and more flexible.

Depositing money into your account

Once your account is open, you need to move money from your bank into your brokerage account. Most brokers let you link your checking or savings account directly. You authorize the transfer on the broker's website, and the money usually arrives within one business day. Some brokers offer when ready deposits if you use certain banks.

If you do not want to link your bank account, you can mail a check to the broker's address (found on their website). This takes longer — usually three to five business days — and some brokers charge a fee for check deposits.

You can deposit as much or as little as you want into a taxable brokerage account. There is no annual limit. If you are using a retirement account like an IRA, there are annual contribution limits set by the IRS — for 2024, the limit is $7,000 for most people under 50, and $8,000 for people 50 and older.

Placing your first buy order

Once money is in your account, you can buy stocks. Log into your broker's website or app, find the search bar, and type the company name or stock ticker symbol (a one- to five-letter code like AAPL for Apple or MSFT for Microsoft). The broker will show you the current price per share.

You then decide how many shares to buy. If you want to spend $500 and the stock costs $150 per share, you can buy 3 shares (costing $450) and have $50 left over. Or, if the broker offers fractional shares, you can buy exactly $500 worth — which might be 3.33 shares. Enter the number of shares or the dollar amount you want to spend, review the order, and click confirm. The order is placed when ready.

The trade settles within two business days, meaning the shares officially become yours and appear in your account. You can sell them at any time during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays when the stock market is open).

Understanding costs and fees

Most brokers charge zero commission on stock trades, meaning you do not pay a fee when you buy or sell. However, some brokers charge fees for other services: account maintenance, inactivity, wire transfers, or research tools. A few brokers charge commission on every trade — usually $5 to $10 per trade.

When you sell a stock for more than you paid, you owe capital gains tax. The amount depends on how long you held the stock. If you held it for less than a year, it is taxed as short-term capital gains at your regular income tax rate. If you held it for a year or longer, it is taxed as long-term capital gains at a lower rate (0%, 15%, or 20% depending on your income). You do not pay this tax until you sell — just owning the stock does not trigger a tax bill.

Some stocks pay dividends — a small cash payment to shareholders, usually quarterly. If you receive dividends, you owe tax on that income in the year you receive it, even if you do not sell the stock.

Deciding what stocks to buy

Choosing which stocks to buy is a separate decision from how to buy them. Some people research individual companies and pick stocks they believe will rise in value. Others buy index funds or exchange-traded funds (ETFs) that own hundreds of stocks at once, spreading the risk. Still others follow a strategy like dollar-cost averaging, where they invest the same amount every month regardless of price.

Your broker's website usually offers research tools, stock screeners, and educational articles to help you learn about companies. Many brokers also offer paper trading — a practice account with fake money — so you can place orders without real money at risk.

The stocks you choose depend on your goals, how much risk you are comfortable with, and how much time you want to spend researching. There is no single right answer, and different strategies work for different people.

What happens after you buy

Once you own shares, you can check their value anytime by logging into your account. The price changes every second the market is open. You can sell whenever you want during market hours — just search for the stock, enter the number of shares, and confirm the sale. The money from the sale appears in your account within two business days.

You can also set up automatic investments, where your broker buys a set amount of a stock or fund every week or month. This removes the need to decide when to buy and can help you avoid trying to time the market.

Your broker sends you tax documents at the end of the year (Form 1099-B for taxable accounts, or a similar form for retirement accounts). These show your gains, losses, and dividends, which you use when filing your tax return.

Frequently Asked Questions

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

Many brokers have no minimum account balance. With fractional shares, you can invest as little as $1. However, most people start with at least $100 to $500 so they have enough to diversify across a few stocks or funds and so trading costs (if any) do not eat up a large percentage of their investment.

Can I lose more money than I invested?

In a regular brokerage account, no — the worst case is that a stock goes to zero and you lose your entire investment in that stock. However, if you use margin (borrowing money from your broker to buy stocks), you can lose more than you invested. Most beginners should avoid margin until they understand how it works.

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

A stock is a share of ownership in one company. A mutual fund or ETF is a collection of many stocks (or bonds) bundled together and managed as one investment. Funds spread your risk across many companies, while a single stock concentrates your risk in one company. Both can be bought through the same brokerage account.

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 for a profit. However, if a stock pays dividends, you owe tax on the dividend income in the year you receive it, even if you do not sell the stock. Holding the stock without selling does not trigger a tax bill.

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 brokers offer after-hours trading, but prices are less stable and spreads (the difference between buy and sell prices) are wider, so it is riskier for beginners.