05/01/2023, 11:28 How to Buy and Sell Stocks for Your Account

INVESTOPEDIA INVESTING

How to Buy and Sell Stocks for Your

Account
By ADAM HAYES Updated December 06, 2022
Reviewed by SOMER ANDERSON
Fact checked by AMANDA BELLUCCO-CHATHAM

To buy stocks, you’ll typically need the assistance of a stockbroker, since you
cannot simply call up a stock exchange and ask to buy stocks directly. When you
use a stockbroker, whether a human being or an online platform, you can
choose the investment that you wish to buy or sell and how the trade should be
handled.

In this vein, there are two broad categories of brokers to choose from: a full-
service broker or an online/discount broker. Below, we discuss how you can use
these options to trade stocks on your own.

We’ll also talk about a third option: the direct stock purchase plan (DSPP),
whereby investors can obtain shares directly from certain public companies.
This lets you buy stocks online without a broker; however, this option is limited
in its usefulness as you would have to maintain DSPPs at every company that
you own stock in, rather than having your entire portfolio housed in a single
place. Moreover, many online brokers today offer commission-free stock
trading, often making this an easier and cost-effective option.

KEY TAKEAWAYS
To trade stocks, you’ll often need to use a broker to place your orders
on an exchange.
A full-service broker, while more expensive, provides expert investment
research, advice, and commentary in addition to comprehensive
financial planning.
A discount broker is a cheaper option that provides basic execution
services for investors who do their own research and analysis.
Today, many online brokers offer commission-free trading along with
free tools and screeners, making it easier than ever to trade stocks on
your own.
You can also buy stocks online without a broker through some
companies' direct stock purchase plans (DSPP), but this can be
cumbersome.

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I Want To Start Buying Stocks: Where Do I Start?
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Where to Buy Stocks

Most of the time, stocks are listed and traded on exchanges, licensed venues
where buyers and sellers meet, often with the assistance of a broker or other
intermediary. These intermediaries will be members of the exchange and use
their access to buy and sell shares on your behalf. Major exchanges in the
United States include the New York Stock Exchange (NYSE) and the Nasdaq
market.

Smaller companies with less liquid shares and minimal market caps
(sometimes called penny stocks) may alternatively trade over-the-counter
(OTC) on more loosely regulated platforms such as the OTC Pink Sheets. Shares
of these companies are often more volatile and risky, so investors choosing to
trade on the OTC market should engage in extra due diligence and understand
the risks involved.

FAST FACT
Today, most brokerages will have access to both major exchanges
and OTC markets.

Buying Stocks With a Full-Service Broker

Full-service brokers are what some people visualize when they think about
investing—well-dressed businesspeople sitting in an office and chatting with
clients. These are the traditional stockbrokers who will take the time to get to
know you personally and financially.

They will look at factors such as marital status, lifestyle, personality, risk
tolerance, age (time horizon), income, assets, debts, and more. [1] By getting to
know as much about you as they can, these full-service brokers can then help
you develop a long-term financial plan.

These brokers can not only help you with your investment needs but also
provide assistance with estate planning, tax advice, retirement planning,
budgeting, and any other type of financial advice—hence the term “full service.”
They can help you manage all of your financial needs now and long into the
future and are for investors who want everything in one package.

In terms of fees, full-service brokers are more expensive than discount brokers,
but the value of having a professional human investment advisor by your side
can be well worth the additional costs. Accounts today can be set up with as
little as $1,000. Most people, especially beginners, would fall into this category
in terms of the type of broker whom they require.

FAST FACT

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Those who want a set-it-and-forget-it approach to investing but
don’t have the money or time to hire a full-service broker can opt
for a roboadvisor. These are algorithmic investment platforms that
you can manage through an app or website for a fraction of the cost
of a traditional financial advisor.
Buying Stocks Online
Online/discount brokers, on the other hand, do not provide any investment
advice and are basically just order takers. They are much less expensive than
full-service brokers, since there is typically no office to visit and no certified
investment advisors to help you. Cost is usually based on a per-transaction
basis, and you can typically open an account over the Internet with little or no
money. Once you have an account with an online broker, you can usually just
log on to its website and into your account and be able to buy and sell stocks
instantly.

Remember that since these types of brokers provide absolutely no investment

advice, stock tips, or investment help of any kind, you’re on your own to
manage your investments. The only assistance that you will usually receive is
technical support. Online (discount) brokers do offer investment-related links,
research, and resources that can be useful. If you feel that you are
knowledgeable enough to take on the responsibilities of managing your own
investments, or if you don’t know anything about investing but want to teach
yourself, then this is the way to go.

The bottom line is that your choice of broker should be based on your
individual needs. Full-service brokers are great for those who are willing to pay
a premium for someone else to look after their finances. Online/discount
brokers, on the other hand, are great for people with little start-up money and
who would like to take on the risks and rewards of investing upon themselves,
without any professional assistance.

Buying Stocks Via a Direct Stock Purchase Plan

Sometimes, companies (often blue-chip firms) will sponsor a special type of
program called a direct stock purchase plan (DSPP). [2] DSPPs were originally
conceived generations ago as a way for businesses to let smaller investors buy
ownership directly from the company. Participating in a DSPP requires an
investor to engage with a company directly instead of with a broker, but every
company’s system for administering a DSPP is unique.

Participating companies will offer their DSPP through transfer agents or

another third-party administrator. To learn more about how to participate in a
company’s DSPP, an investor should contact the company’s investor relations
department.

How to Trade Once You Have a Broker

Once you’ve chosen your brokerage platform, you will need to establish and
fund an account before you can begin trading. Today, it’s easier than ever to link
a bank account online and transfer funds, or to electronically roll over an
existing brokerage account to another firm. You can also choose to make
recurring deposits into your brokerage account to increase your portfolio on a
regular basis.

Once funded, you simply need to go online or call your broker to place a trade.
Stocks are designated by a unique ticker symbol, a one- to four-letter
mnemonic assigned to a particular company. MSFT, for instance, is the ticker for

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Microsoft Inc., and AAPL is the ticker for Apple Inc. If you don’t know the ticker
of your stock, it is easy to look it up online or via your broker.

When you select the stock ticker that you would like to trade, you’ll be met with
a price quote, a set of information about the stock’s price and activity. This will
show you the last price at which the shares traded, as well as a bid and an offer.
The bid is the highest price at which somebody in the market will buy a share
(and thus is the best price at which you can sell to them). The offer, or ask, is the
lowest price at which somebody in the market is willing to sell (and thus, it's the
best price at which you can buy from them). The difference between the bid and
offer prices is known as the spread. A narrower spread typically indicates that
the market for the stock is quite active and liquid. A wider spread indicates the
opposite. After considering the price quote, you may place your order.

Market orders are the most basic type of order and will give you immediate
execution at the prevailing market price. A limit order, on the other hand, allows
you to set a specific price at which to buy or sell. If the price never reaches that
limit level, then the trade will remain active until it is canceled. Many such
trades are day orders that will remain good until the end of the trading day. If
you want the order to be active only briefly, you can instead specify with your
broker that it is immediate or cancel (IOC). Alternatively, if you want the order
to remain in force for longer than a day, then you can designate it good ’til
canceled (GTC). Other conditions can also be placed on an order, such as a stop-
loss.

Once your trade is executed (in whole or in part), you will receive a fill—a
summary of your order’s details.

How Old Do You Have to Be to Trade Stocks?

You must be at least 18 years old in the United States to open a brokerage
account and trade stocks. [3] For somebody younger than 18, a parent can set
up a custodial account on their behalf.

Is It Possible to Buy and Sell Stocks for Free?

Yes. Several online brokerage platforms (such as Robinhood) offer commission-
free trading in most stocks and exchange-traded funds (ETFs). Note that these
brokers still earn money from your trades, but by selling order flow to financial
firms and loaning your stock to short-sellers.

What Is the Easiest Way to Buy Stock?

The easiest way, in terms of getting a trade done, is to open and fund an online
account and place a market order. While this is the quickest way to buy stocks,
it might not always be the wisest. Do your own research before deciding what
type of order to place and with whom.

How Can You Buy Stocks Online Without a Broker?

Usually you need to open an account with a broker to buy and sell stocks
online. Some publicly traded companies, however, do offer a direct stock
purchase plan (DSPP), where you can buy shares directly. Instead of using a
broker, the company’s transfer agent manages the transaction.

The Bottom Line

You can buy or sell stock on your own by opening a brokerage account with one
of the many brokerage firms. After opening your account, connect it with your
bank checking account to make deposits, which are then available for you to
invest in.

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However, do not equate the ease of opening an account with the ease of
making good investment decisions. It is generally recommended that beginners
speak to a qualified financial advisor. New investors might benefit from reading
the key book The Intelligent Investor, by Benjamin Graham. Smart investing can
be highly satisfying, so take it slow, do your research, and seek out a broker that
suits your interests and goals.
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Related Terms
Direct Stock Purchase Plan (DSPP): Definition and How
DSPPs Work
A direct stock purchase plan (DSPP) enables individual investors to purchase stock
directly from the issuing company without a broker. more

Margin and Margin Trading Explained Plus Advantages and

Disadvantages
Margin is the money borrowed from a broker to purchase an investment and is the
difference between the total value of the investment and the loan amount. more

What Is a Brokerage Account? Definition, How To Choose,

and Types
A brokerage account is an arrangement that allows an investor to deposit funds and place
investment orders with a licensed brokerage firm. more

Broker: Definition, Types, Regulation, and Examples

A broker is an individual or firm that charges a fee or commission for executing buy and
sell orders submitted by an investor. more

What Is a Brokerage Firm? How It Makes Money, and Types

A brokerage firm acts as an intermediary who makes matches between buyers and sellers
of stocks, bonds, and other financial assets. more

Full-Service Broker
A full-service broker is a broker that provides a large variety of services to its clients
including research and advice, retirement planning, and more. more

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