There are very few barriers to setting up your own stock trading account and making trades online yourself, and you’ve got more online brokers available than ever to choose from. While buying and selling stocks online can seem intimidating at first, the process is straightforward.
Big brokers Fidelity Investments, Charles Schwab, TD Ameritrade and E-Trade still dominate the trading and investing scene, with client assets exceeding a staggering $13.5 trillion as of 2023. But they’re not the only brokers worth considering. Finder reviews at least 18 brokers to help readers understand where each stock trading platform shines and falls short. The point is, you’ve got options.
The increasing competition over the past few decades has transformed the way everyday investors access the stock market — and it’s been for the better. Today’s traders and investors have access to a lengthy list of user-friendly platforms that offer convenient, uncomplicated access to the market, and it’s greatly driven down costs.
Brokers, banks and other financial services companies follow a regulatory process known as Know Your Client (KYC), which is a process to verify the identity and other credentials of customers. When you’re applying for a brokerage account, you’re taking part in the KYC process.
Opening an account with an online trading platform is painless and usually takes just a few minutes. While the exact format will vary from broker to broker it must adhere to KYC standards: provide personal information to verify your identity and answer a handful of questions about your investing experience and goals.
Personal information you can expect to provide include:
Most brokers use an automatic KYC process, which means your application will often be approved instantly or within a few minutes. If a broker is unable to verify your information, you may be asked to submit proof of ID.
Matt's tip on signing up with a broker
You are not confined to just one broker. If you're between two investing platforms and can't decide, open an account with both! This will not only let you take advantage of multiple sign-up bonuses (if available) but will also let you enjoy the benefits and features each broker has to offer.
— Matt Miczulski, Editor, Investments.
While you can open an account with most brokers without a minimum deposit, you can’t trade until you have sufficient funds in your account to cover the cost of the transaction.
One of the easiest ways to do this is to link your bank account and transfer funds electronically via the Automated Clearing House (ACH) network. ACH transfers take between one to three business days to complete, but some brokers offer a feature called “instant deposits” or “instant buying power,” which let trade up to a certain amount before the funds have settled.
Other funding methods include wire transfer, check deposit and account transfers from other brokerage accounts. Credit cards are typically not permitted as a brokerage account funding method.
How do you choose the best stocks to buy?
A good place to start is with an industry that interests you, and then explore the different companies in that space. Identify the industry’s biggest companies and key players, along with young companies with potential for growth. But also figure out which companies are falling, or have fallen, out of favor. If you want to follow a Warren Buffett saying, “never invest in a business you cannot understand.”
Tools like stock screeners can help you narrow down stocks by sector, industry, price range and more. Search for companies by name or ticker symbol, and if you’re on the fence about a purchase, add the stock to your watchlist to keep an eye on its performance. Analyst research reports can give you valuable insight into companies and guidance as to whether a particular company may be a good investment at this time.
At the end of the day, you should perform as much in-depth research as possible until you’re comfortable investing.
With a stock in mind and funding in place, it’s time to invest. But before you buy any stocks, you should know how much money you want to invest in any particular stock.
Consider your budget, investment goals and your overall portfolio allocation. With the advent of fractional share trading, you no longer need to pay the entire share price to invest. Fractional shares lets you invest much smaller dollar amounts in a stock — $1 with many brokers — instead of having to buy whole shares. Not every broker offers this feature.
The ideal number of stocks for your portfolio depends on your investment goals and level of desired diversification. Renowned value investor Benjamin Graham put this number between 10 and 30 stocks. New investors may hold fewer stocks, while experienced traders may feel comfortable monitoring a wider range of securities.
There are two main ways to buy stocks online: placing a market order or placing a conditional order.
Once you’ve entered your transaction specifics, including the type of order you’d like to execute and the number of shares you’d like to purchase, submit the order.
If you want to buy stocks online but would rather outsource portfolio management than do it yourself, then a robo-advisor might be an option. Robo-advisors use algorithms to automatically invest in ETFs of stocks and bonds according to your investing experience, risk tolerance and timeline. This passive investing approach can save you time and worry, as you don’t need to research stocks and can take the emotion out of investing and managing your portfolio.
The cost to buy stocks depends on each specific trading platform. Some online brokerages like SoFi Invest, Robinhood and Public charge no commissions to trade stocks while others require a minim deposit just to open a trading account. Before Robinhood pioneered commission-free stock trading, brokers charged anywhere from $5-to-$10 per trade.
But the overall cost to buy stocks online will include both trading costs and account fees. The best online trading apps charge no commissions and the fewest miscellaneous fees.
Once the broker executes your order, you’re a shareholder. Now just follow your investing plan.
The typical buy-and-hold investor holds on to stocks in the hopes that the shares will eventually increase in value. They may hold a stock for months or years before they decide to sell it — hopefully at a profit.
Active traders, on the other hand, may offload a stock quickly. Specifically, day traders engage in intraday trading, which involves buying and selling a stock over a single trading day. The aim here is to take advantage of sudden changes in a stock’s price. This type of trading is complex, fast-paced and requires a comprehensive understanding of the market. It’s not a suitable trading strategy for beginners.
Ultimately, what you do with the assets in your portfolio depends on your investment goals, strategy and risk tolerance. Make sure to check in occasionally on your investments to track their performance and ensure your portfolio still aligns with your investment goals.
The process of selling your stocks is equally as important as buying them. But not every investor follows the same playbook.
Some experts say you should consider selling your stocks if the company’s fundamentals change for the worse or if the competitive landscape changes. For instance, you may decide to sell your stock in a company whose earnings continue to steadily decrease or whose performance has dramatically weakened compared to industry peers. Another reason to sell might be that you need the money for a more attractive investment.
In an ideal situation, investors want to sell at the point in time in which it will be most profitable. But timing the market is incredibly difficult, if not impossible, and can be costly. This is why it’s important to develop a strategy and stick to it.
Generally speaking, yes, it’s safe to buy stocks online. Most online trading platforms employ safety measures like 24/7 infrastructure monitoring and two-factor authentication as standard protocols along with maintaining a membership or good standing with the US Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). But, like with anything on the internet, there are still some things to watch out for:
Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.
Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
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