What you actually do when you buy a stock

Buying a stock means you own a small piece of a company. When you buy one share of Apple, you own a fraction of Apple — not enough to run anything, but enough that you get a proportional cut if the company makes money and enough that the share price can go up or down. You buy stocks through a brokerage account, which is an account at a financial company that holds your money and executes the trades.

The basic steps are: open an account at a brokerage, deposit money, search for the stock you want by its ticker symbol (a short code like AAPL for Apple), decide how many shares to buy, and place an order. The brokerage finds a seller, the trade happens, and the shares appear in your account. You can then hold them, sell them later, or do nothing and watch the price move.

The price you pay per share changes constantly during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order during market hours, you usually get filled at or near the current price. If you place an order after hours or before the market opens, it waits until the next market session.

Key Takeaways

  • You buy stocks through a brokerage account, which you open online in about 10 minutes and fund by linking a bank account or transferring money.
  • Each stock has a ticker symbol (like MSFT for Microsoft) that you use to search and place orders.
  • Stock prices move during market hours (9:30 a.m. to 4 p.m. Eastern, Monday through Friday), and your order fills at whatever price the market is at when you buy or sell.
  • You can sell a stock anytime the market is open, and the money goes back into your brokerage account within one to three business days.
  • Brokerages differ in fees, research tools, and minimum deposits, so comparing a few before opening an account saves money over time.

Opening a brokerage account

A brokerage account is where your stocks live and where you place orders to buy and sell. Most major brokerages — Fidelity, Charles Schwab, E*TRADE, Robinhood, Webull, and others — let you open an account online in 10 to 15 minutes. You will need your Social Security number, a government ID, your address, and a bank account to link for deposits.

When you open the account, the brokerage will ask whether you want a standard taxable brokerage account or a retirement account like an IRA. For most people starting out, a standard taxable account is simpler — you can buy and sell whenever you want without restrictions. A retirement account has tax advantages but locks your money away until you turn 59½ (with some exceptions).

After you open the account, you fund it by linking a bank account and transferring money. This usually takes one to three business days. Some brokerages let you start trading when ready with unsettled funds, but the money won't be fully available until the transfer clears.

Finding and buying a stock

Once your account is funded, log in to your brokerage and look for the search or quote box. Type the company name or its ticker symbol. Ticker symbols are short codes: AAPL (Apple), MSFT (Microsoft), TSLA (Tesla), AMZN (Amazon). If you do not know the ticker, search the company name and the brokerage will show you the right symbol.

Click on the stock to see its current price, a chart of how it has moved, and basic information about the company. Then click "Buy" or "Place Order." The brokerage will ask how many shares you want and what type of order you want to place. A market order buys at the current market price when ready. A limit order lets you set a maximum price you will pay — the order only fills if the stock drops to that price or lower.

For a beginner, a market order is usually simpler. You see the current price, you click buy, and the trade happens in seconds. The shares appear in your account, and you own them. Your account balance drops by the amount you spent.

Understanding what happens after you buy

After you buy a stock, you own it. The price will move up and down every trading day. You can watch it in your brokerage account, which shows your current holdings, the price you paid, the current price, and your gain or loss in dollars and percentage.

You do not have to do anything. You can hold the stock for years. You can check it once a week or once a month. You can ignore it completely. The stock will keep existing in your account whether you look at it or not. Some stocks pay dividends — small cash payments the company sends to shareholders — which land in your account automatically and can be reinvested or withdrawn.

If the price goes up and you want to lock in the gain, you sell. If the price goes down and you think it will recover, you can hold. If you think it will keep falling, you can sell and move the money elsewhere. There is no rule about how long you must hold a stock.

Selling a stock

Selling is the reverse of buying. Log into your brokerage, find the stock in your holdings, and click "Sell." Choose how many shares to sell (you can sell all of them or just some), decide whether to use a market order or limit order, and confirm. The trade happens, and the money goes back into your brokerage account as cash.

The cash is available to spend or reinvest when ready, but it takes one to three business days to settle — meaning the money is fully yours and can be transferred to your bank account. During the settlement period, you can still use the cash to buy other stocks, but you cannot withdraw it to your bank yet.

When you sell, you may owe taxes on any profit. If you bought a stock for $100 and sold it for $150, you have a $50 gain and will owe capital gains tax on that $50 (the rate depends on how long you held it and your income). Your brokerage tracks these gains and reports them to the IRS, and you report them on your tax return.

Comparing brokerages before you start

Most major brokerages charge zero commission to buy or sell stocks, so the cost difference is usually small. What varies is the research tools they offer, the user interface, the minimum deposit, and the customer service. Fidelity and Charles Schwab are known for research and education. Robinhood and Webull appeal to people who want a straightforward mobile app. E*TRADE and TD Ameritrade (now part of Charles Schwab) offer more advanced tools for active traders.

Open an account at one brokerage to start. You can always open another account later if you want to try a different platform. There is no penalty for having accounts at multiple brokerages, and many people do.

Common mistakes to avoid

The biggest mistake is buying stocks you do not understand. If you cannot explain in one sentence why you own a stock, you probably should not own it. Read the company's basic information before you buy — what does it do, how does it make money, who are its competitors.

Another common mistake is trading too much. Every time you buy and sell, you pay taxes on any gains and you risk selling at the wrong time. Most people do better by buying stocks they believe in and holding them for years rather than trading in and out.

A third mistake is putting all your money into one stock. If that company has bad news, your entire investment drops. Spreading money across different companies and industries reduces risk. Many beginners start by buying a few stocks they know, then later move to index funds or ETFs that own hundreds of stocks at once.

What happens if the brokerage goes out of business

Your stocks are protected even if the brokerage fails. Brokerages are required to hold your stocks in your name, separate from the brokerage's own money. If the brokerage goes under, your stocks transfer to another brokerage and you keep them. Cash in your account is insured up to $250,000 by the Securities Investor Protection Corporation (SIPC), a government-backed insurance program.

This is why it matters to use a real, regulated brokerage. Stick with companies you have heard of or that are regulated by the SEC (Securities and Exchange Commission) or FINRA (Financial Industry Regulatory Authority). Check the brokerage's website for its SIPC coverage and insurance details.

Frequently Asked Questions

Do I need a lot of money to start buying stocks?

No. Most brokerages have no minimum deposit. You can open an account and buy a single share of any stock. If a stock costs $150 per share and you have $150, you can buy one share. Some brokerages offer fractional shares, meaning you can buy a portion of a stock for any dollar amount — $50, $25, or $10.

What is the difference between a market order and a limit order?

A market order buys or sells when ready at whatever the current price is. A limit order sets a price ceiling (for buying) or floor (for selling) and only fills if the stock reaches that price. Market orders are faster and almost always fill. Limit orders may never fill if the stock never reaches your price, but they protect you from buying at a price higher than you want.

Can I lose more money than I invested?

If you buy stocks with money you deposit, no — the worst that can happen is the stock goes to zero and you lose your entire investment. You cannot lose more than you put in. However, if you borrow money from your brokerage to buy stocks (called margin), you can lose more than your initial deposit if the stocks fall far enough.

How long does it take to sell a stock and get the money?

The trade happens when ready during market hours. The money appears in your brokerage account as cash when ready and is available to buy other stocks right away. However, it takes one to three business days to settle, meaning you cannot transfer the cash to your bank account until settlement is complete.

Do I have to report my stocks on my taxes?

Yes. When you sell a stock at a profit, you owe capital gains tax. Your brokerage sends you a form (1099-B) listing all your sales, and you report the gains on your tax return. If you hold stocks that pay dividends, those are also taxable income. If you only buy and hold without selling, you do not owe taxes until you sell.