How to buy shares online

Before you launch into the stock market, you should first make a plan. You can do this by asking yourself a few basic questions around three main topics:

1. Goals: What are your investment objectives? What is your timeframe?
2. Time: How much time do you want to spend managing your investments?
3. Risk: Are you okay with high risks or do you prefer to worry less?

Knowing the answers to these questions will help determine what kinds of stocks are the best fit for you, or whether stocks are for you at all.

Are stocks for you?

So you're wondering if stocks are your thing? Fair enough! It all boils down to how much risk you can stomach. Here's a quick gut check. Imagine your stocks took a nosedive. We're talking a 20% drop in a week. How does that make you feel?

If you're breaking out in a cold sweat, stocks might not be your thing. Maybe look into bonds instead. They're like the smooth jazz of investing - less excitement, but easier on the nerves. But if you're thinking, 'Eh, it's just a bad week,' then you might have the stomach for stocks.

Once you've decided to jump into the stock market pool, you'll need a diving board. That's where online brokers come in. The problem is, there are a lot of them! It's like trying to pick a flavor at an ice cream shop with infinite choices.

No need to feel overwhelmed, though. We've got a nifty little tool that's like a matchmaking service for you and your ideal broker. Just answer a few quick questions in our broker finder tool and you'll get a personalized recommendation.

What makes a broker 'the one'? Here's what we look at:

• Fees (because nobody likes surprise charges)
• Trading platforms (it must be easy and fun to use)
• Stock selection (the more the merrier)
• Account opening ease (life's too short for tons of paperwork)
• Safety (this is crucial - we're talking about your money after all)

Open an investment account and deposit money

So, you've found your online broker. Now it's time to open your investment account. It's like a bank account, but it can hold cash AND shares.

Opening an account is all online at the majority of online brokers. No need to put on pants and leave the house. They'll ask for your personal info like name, address, your favorite ice cream flavor (okay, not that last one). You'll have to pick an account plan, provide some information about your financial knowledge, and then prove you are you by uploading some personal documents - so make sure you have those ready.

After you hit submit, the broker needs to check everything out. This could take a few hours or a couple of days, depending on the broker.

Funding your account

Once your shiny new investment account is up and running, it's time to get some cash into it. This is referred to as funding your account. Depending on the broker, this can be done via bank transfer (bit old school but reliable), credit/debit card (quick and easy), or electronic wallets like PayPal or Apple Pay (if you're feeling techy).

Some brokers have a minimum deposit amount that you have to upload before you can start trading. This can be as low as a few dollars, and in some extreme cases, as high as $2,000.

Tip: open a demo account

Picture this: you get to play the stock market game without risking a single penny of your cash. That's exactly what demo accounts offer! It's like a flight simulator, but for stocks. Same look, same feel as the real trading platform but no actual money changes hands - all deals are virtual. It helps you get the hang of stock trading and get cozy with the trading platform before you dive into the market with your hard-earned savings.

Let's talk about how to find the stocks you want to buy. There are way too many of them on the stock market to just pick one blindly. You can get inspiration from others or do your own research. For example, you could peek at stocks that Warren Buffett owns or you can let your broker be your guide. They dish out regular stock analyses and recommendations, usually for free.

Want to do your own research? This is where your investment plan comes into play. Your larger investment objectives and your risk tolerance will probably point you to some types of stocks and sectors and perhaps rule out some others. To see how you can narrow down your choices and find the right stocks, read our tips for beginners on how to select stocks.

Buy your stocks

You have the account, the cash, and the stock you want to buy. Now all you need to do is press the 'Buy' button. Yes, it's that easy! Just log in to your online trading platform; find the stock you have selected by using the search function; enter the number of shares you wish to buy; and click 'Buy,' which will initiate the purchase of the shares. Alternatively, you can just type in how much money you’d like to spend on your chosen stock.

When placing an order, you can choose from various order types. For example, a market order buys immediately at the current market price, while a limit order allows you to specify the exact price at which you want to buy the shares. For more details, read our guide on how to choose the right stock order type.

At an increasing number of brokers, you can now also buy fractional shares. This means that, for example, if a stock costs $500 apiece, you can decide to buy just a $20 slice of it, making you the owner of 1/25th of a share.

Keep tabs on your stock positions

If you bought your shares with the goal of holding them for a longer term, don't be a helicopter parent. No need for daily attention, put away that stock trading app. But don't go into hibernation either. Peek at the company's quarterly and annual reports, keep an eye on market movements and where the economy is headed.

Every now and then, give your strategy a once-over. Maybe it's time to break up with some underperformers, double down on your rising stars or even look for new stocks to invest in.

If you are such a buy-and-hold investor, check out the best brokers for long-term investing.

If you are more of a short-term buyer, you'll need to be aware of the stock's fundamentals and be prepared for more active position management. This could mean setting up a stop-loss price of where to cut losses, or a target price of where you’d want to sell your stocks to realize a profit.

Ready to buy your first shares but still need a helping hand? Check out our My First Stock Trade Quest, where we guide you, step by step, through the process of opening your first broker account and buying your first stock.

What does buying shares in a company really mean?

When you buy shares in a company, you become a shareholder, i.e. an owner of that company in a very small percentage. For example, Tesla has 185 million tradable shares (outstanding). When you buy 100 Tesla company shares, you will be one of the owners of Tesla. Your ownership percentage will be very tiny, just 0.000055% (100/185 million). Still, you will be an owner with all the rights that come with this ownership:

The right to receive dividends - when the company pays dividends from its profits, you will receive a part of this. In our Tesla example, if the company paid $100 million in dividends, you would receive $55 (0.000055%*100 million). The right to vote - if you are a shareholder of a company, you have the right to participate at the company's annual meeting and vote on the topics discussed there. The weight of your vote will be proportional to the number of shares you hold.

What is the difference between stocks and shares?

The word 'stock' is the general term for company ownership, as in 'I invest in American tech stocks like Apple and Facebook.' The word 'share', meanwhile, usually refers to a piece of ownership stake in a company. For example, you can say 'yesterday I bought 100 Tesla shares'.

How to manage the risks of buying shares?

Stock investments always come with some risks that need managing. One such risk is scams. Unfortunately, there are tons of scam 'brokers' out there trying to steal your money. When buying shares online, go with our broker selection. We have an active account with the brokers we reviewed and we test them regularly.

Diversify your portfolio, don't put all your savings in just one or two stocks. If the company you selected goes bust, you could lose all your invested money. A similar risk is when the majority of your stock holdings are in the same industry. Buy dfferent shares across many industries.

Avoid crappy stocks. By 'crappy' we mean anything from a company that defaults to simply buying an overpriced share. You can avoid this trap by stepping up your investment knowledge and taking online courses. There's a book we love called The Intelligent Investor by Benjamin Graham. It comes highly recommended by Warren Buffett.

How can I protect my investments in stocks?

Since you are trading with your savings, paying attention to safety is super important. Most of the brokers we recommend have solid investor protection schemes in place for the majority of their clients. Investor protection means that up to a certain limit, you get your money back if the broker goes into bankruptcy or commits fraud.

The level of investor protection varies from country to country. In most of Europe, the amount of investor protection is usually €20,000, while in the US it is significantly higher, at $500,000. Brokers under UK regulation typically offer investor protection up to £85,000.

Do I need to pay taxes after if I own shares?

This depends on your country of residence. In most countries, you will have to pay either capital gains tax or personal income tax when you sell your shares with a profit. There are some sweet spots like Singapore, for instance, where you won't have to pay taxes if you sell your stocks.

Here's a pro tip: check whether your country of residence has investment accounts that offer favorable tax conditions. For example, in the UK, this account is called ISA, or Individual Savings Account, which is exempt from income tax and capital gains tax on investment returns. In the US, Individual Retirement Accounts (IRAs) offer similar benefits.