How to Buy Small Lots of Stock

With the right type of account, you can buy small stock amounts.

With the right type of account, you can buy small stock amounts.

You can buy a few shares of a stock just as easily as institutions such as mutual funds buy millions of shares. In fact, you'll spend more time setting up your investment account and finding a stock to buy than you will actually buying a few shares. Just do one task at a time and you'll be trading with the big guys in no time.

Choose an online broker. Only a stock broker can actually purchase stocks. If you go to a broker's office, you'll end up paying more in trading fees than you can make on a small lot of stocks. Your best bet is a discount online broker. Enter the search term "discount online brokers" and shop around. You'll find that these brokers charge anywhere from $4 to $12 dollars per trade. You tend to pay more for sites that offer research tools and portfolio tracking. Do your comparison shopping and choose one.

Open an account with the online broker. You can do this completely online without ever having to visit an office. However, some online brokerages have local offices if you prefer to have help with your paperwork. You can open the account without putting any money into it. You mostly provide contact information and click "agree" at the end of their legal notices.

Mail a check or transfer funds. You can mail a check to the online broker to fund your account. Include your new investment account number on the check. You can also transfer funds by setting up electronic transfer privileges. Online brokerage applications include a section for you to fill out with your routing number and account number. They even include diagrams so you can see where to find those numbers on your check. Typically, the broker will test the electronic connection by making a deposit into your checking account. The deposit amounts to a few pennies, and the brokerage takes it back. Confirm the deposit amount when it comes in by logging into your brokerage account and filling in the deposit amount on your electronic banking authorization form. It's not hard to figure out how to do this. The brokerage sends you an email with complete instructions once you choose the electronic transfer option, or you can visit a local office if the brokerage has one.

Buy your stock. Online brokers don't limit how much or how little you can buy. You can purchase one share if you want, or 10 shares, and on up. Once you know what stock you want, you simply enter the abbreviation for the stock in the trading box, indicate the number of shares you want, and click "buy."

Tips

  • If you know you are going to buy more of the same stock, you save money on trading fees by purchasing all the stock at once instead of making several small purchases. You get charged for each trade you make.
  • If you don't know the abbreviation for your stock, enter "stock symbol look-up" as an online search term and you will find many free sites to help you.

Warning

  • Some online brokers charge a fee if you don't conduct a minimum number of trades each month. If you shop around, you can easily find an online broker that doesn't charge this fee.
 

About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.

Photo Credits

  • Duncan Smith/Photodisc/Getty Images