How Do I Buy Shares of Stock in a Company?

It's important to research stocks before investing.

It's important to research stocks before investing.

Once you've chosen a company to invest in, you're ready to set up an account with a stockbroker, but you shouldn't rush this process. Take the time to decide what type of broker you want to use and to review your options, so that your days of trading are off to a healthy start.

Consult with a full-service broker. A full-service broker offers financial planning advice and help with choosing investments. Usually, full-service brokers have physical offices where you can meet to discuss your options. The fee for buying or selling a stock through a full-service broker is about three times as much as the fee for trading through a discount broker, but a full-service broker is the best option for anyone who wants a hands-off approach to trading.

Contact a discount broker if you want to choose your own stocks. Since discount brokers don't do the legwork of research and investment advice, their fees are much lower than those of full-service brokers. MSN Money adviser Harry Domash recommends asking about minimum opening balance requirements and telephone customer service support when choosing a brokerage. He also suggests choosing a brokerage that insures accounts with Securities Investor Protection Corp. and has walk-in offices in your area.

Put aside enough money to cover the cost of the stocks you want to buy. Your first stock purchase is a cash purchase. Most discount brokers require that you deposit a minimum amount into your account, which is used to purchase the stocks you choose. Full-service brokers may allow you a few days to pay for your stocks.

Open an account with a stockbroker. When you open an account with a full-service broker, you'll need to provide an in-depth financial portrait, including debts, property, mutual funds and retirement information. You provide far less detailed information when applying for an account with a discount broker, though you will need to provide your name, address and Social Security number.

Jot down a company's ticker symbol and the number of shares you want to buy, then get in touch with your broker. Let your broker know whether you want to trade at the market price or whether you want to set a limit on how much you're willing to spend. Your broker will let you know the current price buyers are willing to pay (current bid) and the price that the sellers are requesting (ask) of the company. Usually, you pay an amount somewhere between those two figures. If you're working with a full-service broker, you may work together to find companies to invest in rather than choosing the company on your own.

Review all the information in your broker's response before confirming your bid. Make sure the name that the broker provided in his response is the same company whose ticker symbol you sent, and that the correct number of shares is specified. Confirm that the price is within your limits. By slowing down and reviewing your bid each time, you avoid costly mistakes.


About the Author

Joy Uyeno has been writing about travel, food, fashion, culture and finance since 2005. For three years she wrote a column for the "Honolulu Star-Bulletin" aimed at young and first-time travelers. Her writing has appeared in several local and national publications, including the 2008 anthology "Honolulu Stories." She holds a Master of Arts in writing and publishing from Emerson College.

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