You've probably imagined many times how you're going to buy shares in a company and make enough money to travel the world and last you for the rest of your life. Achieving this is not easy, but you have to start somewhere. Investing in shares online is one of the best ways to reach this goal. And the good news is you that can do all of this completely online, from the comfort of your own home.
In this article, we will explain jargon-free, in plain English, how to buy shares in a company. It's not as easy as watching your favorite TV show, but don’t worry, it's not rocket science either.
People usually ask about how to invest in a company because they either want to make money (profits) or gain some trading experience. Both are possible, and can also be fun, if you select the right stocks.
You can make a profit if your share pays dividends or its price increases. If you do this in the long run, these profits can add up and even make you a millionaire, as it happened with Mr. Gremel: the now 98-year-old investor bought 20 Walgreens shares for $1,000 in 1953, and today they are worth $2 million.
As you gain experience, you will improve your financial literacy. This is one of the best long-term investments. Have your friends ever talked about investments or the stock market, and you had no clue what any of it meant? Don't worry, once you start investing and learning more about it, this won't happen again. You'll understand better how the stock market works and how it influences the economy, as well as your everyday life.
Last but not least, as a shareholder you will be part of a company's story. Have you ever wanted to sit in the same room with Warren Buffet, and participate in a Berkshire Hathaway annual meeting? If you buy some Berkshire shares, you'll have the chance, all you have to do is master the buying of the shares.
Let's take a look at the six steps for how to buy shares online!
The six-step plan to buying shares online
Buying shares online is not rocket science. Follow this simple six-step plan:
- Find a good online broker
- Open an investment account
- Upload money to your account
- Find a stock you want to buy
- Buy the stock
- Review your share positions regularly
Step 1: Find a good online broker
First of all, you need to find a good online broker. Brokerchooser will help you here: get a free recommendation by answering a few questions, or read further to get a general broker recommendation.
When recommending a broker, we take into account the broker’s fees, trading platform, accessible markets to trade, and how easy it is to open an account. Safety is also very important, but since we recommend only safe brokers, you don't have to worry about this.
Step 2: Open an investment account
After finding your online broker, you need to open an investment account. This can usually be done online. The investment account is basically what you need to start buying shares online. Think of it as a bank account where in addition to holding cash, you can also shares. Opening an account usually takes a couple of days, although at some brokers you can get it done within a day.
Step 3: Upload money to your account
In order to buy shares online, you need to have money on your investment account. Usually, you can choose between a bank transfer or depositing funds via credit/debit card. At some brokers, you can fund your investment account even via Paypal, e.g. at eToro.
Are you interested in broker deposits?
Step 4: Find a stock you want to buy
After uploading some money into your account, you can start searching for the best target stocks to buy. You can get inspiration from others' ideas or you can do your own research. Most people listen to others, but if you put some time and energy into your research, the payoff is usually bigger and you can learn a lot more from it. Investment ideas can come from your broker in the form of stock reports and analyses, but you can also use other, independent research. The financial news and investment courses can also be useful in learning how to pick a winning stock.
Step 5: Buy the stock
You have the account, the cash, and the stock you want to buy. Now all you need to do is press the 'Buy' button. You log in to your online trading platform, find the stock you have selected, enter the number of shares you wish to buy, and click 'Buy,' which will initiate the purchase of shares.
When placing an order, you can choose from different order types. 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. Find more details on order types here.
Step 6: Review your share positions regularly
You're done, you've bought the shares, they are yours. Now it is key to monitor your investments. This basically means following your investment strategy. If you bought the shares with the goal of holding for a longer term, you might participate at the company's annual meeting and collect all the news and information about the firm.
For short-term buyers, position management could mean setting up the stop-loss price of where to cut losses, and the target price of where you want to sell the shares with a profit.
Now that you have mastered the 6 steps of buying shares, take a moment to look at the top 5 brokers we have selected for you.
Best 5 brokers for buying shares online
If you're just starting to explore how to buy shares online or where to buy shares, we recommend that you choose one of the following five brokers. We tested all five, and we have live accounts with all of them.
First and foremost, here is a table comparing the main characteristics of each of the brokers:
|Broker intro||US zero-fee discount broker||US discount broker||Global social trading broker||US stockbroker||Danish investment bank|
|Accepts clients from||US||US, India, China||Globally||US||Globally|
|Award||Best broker for beginners||Best broker for cryptos||Best broker for bonds||Best forex broker|
|Account opening score||5.0||5.0||5.0||2.9||3.1|
|Web platform score||4.5||4.5||4.4||4.5||4.5|
Now, let's look into more details about the 5 best brokers where you can buy shares:
|Broker background||Robinhood is a US zero-fee or discount broker established in 2013. If you don't know what discount broker means, read this overview about the best discount brokers in 2018. Robinhood is considered safe because it is supervised by FINRA, the US regulator and provides a maximum of $500,000 investor protection including a $250,000 limit for cash.|
|Fees - one liner||US stock trading is free at Robinhood. There are no inactivity fee and withdrawal fees. On the flip side, Robinhood has really high commission for non-US stocks.|
|Recommended for||Beginners and buy and hold investors focusing on the US stock market|
|Broker background||Webull is a US-based fintech startup offering zero-fee or discount brokerage services. The broker was founded in 2017 and it is regulated by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).|
|Fees - one-liner||
Webull offers commission-free trades for US-based stocks, ETFs, and options. It charges no inactivity fee and withdrawal fee if you use ACH. On the negative side, the financing rates are higher and there are high fees for wire transfers.
|Recommended for||Investors and traders looking for zero-commission trading and focusing on US markets|
|Broker background||eToro is a well-known fintech startup, an Israeli social trading broker established in 2007. eToro serves UK clients by an FCA regulated entity and Australians by an Australian entity. All other customers are served by a Cypriot entity. eToro is not listed on any exchange, does not disclose its annual report on its site and does not have a bank parent. It is also one of the 5 best trading platforms for Europeans. eToro is considered safe because it's UK arm is regulated by a top tier regulator and it is a well-known fintech startup. eToro is a multi-asset platform which offers primarily CFDs, but you can also invest in stocks and crypto assets. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.|
|Fees - one liner||eToro offers free stock trading in Europe and has low fees for non-EU clients. On the negative side, the non-trading fees and financing rates are high.|
|Recommended for||Beginner traders and those interested in social trading (copying other traders’ trades)|
| Visit broker
66% of retail CFD accounts lose money
Fidelity US stockbroker, founded in 1946. It is regulated by top-tier regulators like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Fidelity is considered safe because it has a long track record and is regulated by top-tier regulators.
|Fees - one liner||Fidelity has low trading fees and low non-trading fees. There are no commissions for stock trading which is great. On the negative side, fees for some mutual funds and financing rates can be high.|
|Recommended for||Investors and traders looking for solid research and great trading platforms|
|Broker background||Saxo Bank is a Danish investment bank providing online trading and investments. It is a leading European retail brokerage innovator. Saxo is privately owned, established in 1992, and headquartered in Copenhagen. Saxo is considered safe as it is regulated worldwide by more than 10 financial regulators, including top-tier regulators, like the UK FCA.|
|Fees - one liner||Saxo Bank has average trading and non-trading fees.|
|Recommended for||Investors and traders looking for a great trading platform and solid research|
We hope you were able to choose the best broker to fit your needs. In the following few paragraphs, we have collected a few good tips on stock trading, what to look for, and what to look out for.
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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 164 million shares to buy (outstanding). When you buy 100 Tesla company shares, you will be one of the owners of Tesla. Your ownership percentage will be very tiny, 0.000061% (100/164 million), but still, you will be an owner with all the rights that come with this ownership:
- The right to receive dividends - when the company allocates dividends, you will receive a part of this. Staying with the previous Tesla example, let’s assume that in 2020 Tesla will pay $100 million in dividends, then you will receive $61 (0.000061%*100 million).
- The right of voting - if you are a shareholder of a company, you have the right to participate at the company's annual meeting. At the annual meeting, you will have the right to vote on the topics that will fundamentally influence the future of the company. These topics can vary from the election of the board of directors to the amount of the dividends allocated.
Speaking about financial literacy: when you read about buying shares online, you may find that both the expressions stock and share are used. What is the difference between them? The word stock is the general term for company ownership. For example “I invest in American tech stocks like Apple and Facebook”. Share usually refers to the ownership stake in a company. For example “Yesterday I bought 100 Tesla shares.”
Manage the risk of buying shares
Investments always come with some risks that you should aim to manage (click here to read more about market risk and other types of risks). Below, you can find the most common ones and our advice on how to mitigate them.
Avoid the scams
Risk: Unfortunately, tons of scam “brokers” are out there on the market trying to steal your money. When you see ads for binary options trading or automated investment algorithms that generate outstanding returns, start to get very suspicious. In these cases, the best thing to do is to ignore these ads.
How to manage it: When buying shares online, go with our broker selection. We have an active account with the brokers we selected and we test them regularly.
Diversify your portfolio
Risk: If you put all of your savings in just one or two stocks, and the company you selected goes bust, you could lose all your invested money.
How to manage it: Diversify your investment portfolio. This practically means buying many different shares and not putting all your eggs in one basket. The ideal number of shares in a portfolio ranges somewhere between 20 to 30.
Avoid crappy stocks
Risk: when buying individual stocks, there is always a risk of selecting the wrong ones. Here, 'wrong' could mean anything from a company that defaults to just buying an overpriced share.
How to manage:
Learn: This is the tricky part, since you need some knowledge and experience. The best is to start learning by reading books on investment and taking online courses. There are tons of great books out there, but you can start with the Intelligent Investor by Benjamin Graham. This is also the book on investment most recommended by Warren Buffet.
Gather information: While you are learning, start collecting as much information about your target companies as possible. Read news about them, understand their business profiles, start playing around with their income statements, gain some knowledge about their management background or even attend their annual meetings. These will help you gain a better understanding of the company and the specific industry.
Compare multiples: When it comes to pricing, use industry multiples as a proxy for your target stock. P/E is a basic multiple, but each sector has its own favorite.
Your investment account can be protected
Since you are trading with your savings, it is very important to pay attention to safety. The online brokers we selected have some of the best protection schemes, the level of which depends on the regulatory body of the broker (learn more about investor protection).
|Safety - one liner||Robinhood is regulated by the top-tier FINRA. There is also a high, $500,000 investor protection amount. Robinhood is not listed on any stock exchange and does not disclose its financial information.||eToro is regulated by top-tier regulators, the FCA and the ASIC, and also by Cysec. However, it is not listed on any exchange, does not disclose financial information and does not have a bank parent.||DEGIRO is a licensed investment firm regulated by Dutch Central Bank and Netherlands Financial Markets authorities. On the flip side, the information you can access about the company is limited.||Saxo Bank is regulated by several financial regulators, including the top-tier FCA. It is also a fully licensed Danish bank and provides negative balance protection. On the flip side, Saxo is not listed on any stock exchanges.||Swissquote is regulated by top-tier regulators, it is listed on the Swiss exchange, discloses its financial statements and has a banking license.|
|Country of regulation||USA||UK, Cyprus, Australia||Netherlands, UK||Denmark, UK, France, Switzerland, Singapore, UAE, Japan, South Africa, Australia||Switzerland, UK, UAE, Hong Kong|
|Investor protection amount||$500,000 (securities up to $500,000, cash up to $250,000)||£50,000 for UK residents, €20,000 for residents of non-UK countries||€20,000||€100,000 for cash deposits and €20,000 for securities for most European countries||CHF 100,000 at the Swiss entity, £50,000 at the UK entity|
You can compare the protection amount among all reviewed brokers.
Tip: Use national tax free accounts
In your country of residence, you may have the option to open special investment accounts that offer favorable tax conditions. For example, in the UK, this account is the ISA, the Individual Saving Account, which is exempt from income tax and capital gains tax on the investment returns.
"How to buy shares in a company? How to invest in shares? Where to buy shares!" - Were these things you were asking until now?
Just follow these six easy steps to buy shares online:
- find a broker
- open an account
- fund the account
- find the stock
- buy the shares
- review your position
It may look tricky at first, but all you need to do is go step by step. See you at the next Coca-Cola or Berkshire annual meeting!
If you're still in doubt about which broker to choose, we compiled a brief summary to help:
|Recommended for||Beginners and buy-and-hold investors focusing on the US stock market||Investors and traders looking for zero-commission trading and focusing on US markets||Traders interested in social trading (i.e. copying other investors’ trades) & zero commission stock trading||Investors and traders looking for solid research and great trading platforms||Investors and traders looking for a great trading platform and solid research|
|Award||Best broker for beginners||Best broker for cryptos||Best broker for bonds||Best web trading platform|
|Web platform score||4.5||4.5||4.4||4.5||5.0|
|Account opening score||5.0||5.0||5.0||2.9||2.6|
|Deposit and withdrawal score||2.8||1.9||3.7||3.6||4.8|
|Visit Broker||Visit Broker||Visit broker||Visit broker||Visit broker|
|75% of retail CFD accounts lose money|