Purchasing stocks isn’t as difficult as it appears, but you’ll need to do some research — and understand the technicalities— before you even decide to make your very first investment.

To invest in stocks, you’ll first need to set up a brokerage account, which you can do in as little as 15 minutes. 

Purchasing stocks may sound complicated at first, but the process is actually rather simple. In this article, we’ll go over 5 simple steps that you need to master in order to buy your first share of stock. 

1. Choose a stockbroker online.

To buy stocks online, one of the best options is to use a brokerage service. Your stock purchases can be completed in a few minutes after opening and filling your broker’s account online. If you’re not very comfortable with processing it online, another choice is to use a full-service broker or to acquire stock straight from the company itself.

It’s as simple as opening a bank account: Complete an account application, provide proof of identity and choose how you’ll deposit funds into your new account: by mail or online.

2. Do your homework on the stocks you’re interested in purchasing.

Once you’ve completed the first step, and assuming you’ve managed to finance your brokerage account, it’s time to get down to the business of picking stocks.

To get a head start, you’re gonna want to look into companies you’re familiar with from previous purchases as a consumer.

Don’t get overwhelmed by the avalanche of data and real-time market turbulence while conducting your research.

It’s best to keep things simple: You’re on the lookout for businesses in which you can gain equity ownership.

“Buy into a company because you want to own it, not because you want the stock to go up,” was a famous quote by Warren Buffett. It’s pretty obvious — following that rule has served him well.

The next step in the process is to conduct some research on these companies. It’s best to start with the company’s annual report—specifically, the annual letter to shareholders from the management team.  It will provide you an overview of what’s going on in the company, allowing you to better understand the data in the report.

After that, your broker’s website will provide most of the tools and information you need to evaluate the company, such as SEC filings, conference call transcripts, quarterly earnings reports, and recent headlines. Tutorials and even basic seminars on how to pick stocks are also provided by most online brokers.

3. Decide how many shares you want to purchase in the company.

There should never be pressure on you to buy a specific quantity of shares or to have a stock take up the entirety of your portfolio all at once. You may learn the basics of stock trading by using a stock market simulator or maybe, paper trading. 

You can practice buying and selling stocks with virtual money by using paper trading. Start small – incredibly tiny — if you’re ready to put down significant money. It’s possible to get a taste of what it’s like to own individual stocks by purchasing a single share and seeing if you have the grit to ride out the tough periods. Gaining shareholder swagger will allow you to advance your position in the company.

Fractional shares, a new option from online brokers, may also be of interest to beginning stock investors, as they allow you to acquire a fraction of a stock rather than the entire share. As a result, you’ll be able to invest a lot less money in high-priced equities. 

Brokers such as SoFi Active Investing, Robinhood, and Charles Schwab offer fractional share options.

Many brokerages also provide a tool for converting dollar amounts to shares. If you have a specific amount of money you’d like to invest, such as $500, and you’d like to know how many shares that amount would buy, this can be useful.

4. Decide on your Stock order type.

Keep in mind that your broker’s online order page is full of numbers and incomprehensible word combinations. This glossary of stock trading phrases can come in handy:

• ‘Ask’ is the price sellers are willing to accept for their stock when it is listed on the market.
• In the stock market, a bid is the highest price a buyer is ready to pay for a share.
• The difference between the highest and lowest offer prices is known as the spread.
• You can purchase or sell stock at the best available price with a market order.
• Requesting that a stock be bought or sold only at a specified price or better is known as a limit order.
• This type of order is used to protect against losses when a stock’s price falls below a predetermined level, known as a stop price or stop level.
• To put it another way, if a stop price is hit, then the trade becomes a limit order and is filled up to that point.

There are a lot more complex order types and creative trading maneuvers available now. For the time being, we suggest you not to bother. Investors have built successful careers solely on two types of orders: market orders and limit orders.

Market Orders

Trading at the best available price on the present market is what a market order is all about. When using a market order, your order will be filled promptly, unless you’re trying to acquire a million shares in an attempt to take over the company. If you’re trying to buy a stock with a low volume, the market order might not be approved.

Do not be startled if the price you pay (or receive, if you are selling) differs slightly from the one you were quoted only seconds earlier. Throughout the day, the bid and ask prices are continually changing. It is advisable to utilize a market order to acquire large, reliable blue-chip stocks rather than smaller, more volatile ones. 

Good To Know Information:

• For long-term investors, a market order is the best option because it ensures that the trade is completed regardless of price discrepancies.
• Orders placed “after hours,” when markets have closed, will be filled at the current price when markets reopen the following day.
• Best to look at your broker’s disclaimer about trade execution. At the end of the trading day or on a certain day or time, some low-cost brokers combine all customer trade requests to be executed all at once at the current price.

Limit Orders

In order to regulate the price at which your trade is performed, you can use a limit order. If XYZ stock is now selling at $100 per share, but you believe the company is worth $95 per share, a limit order instructs your broker to hold tight and only execute your order when the asking price falls to that level. A limit order instructs your broker to sell your shares if the bid increases to a certain amount that you choose.

Investors buying and selling smaller firm stocks, which often have bigger spreads depending on investor activity, can benefit from using limit orders. Short-term stock market volatility and stock price importance over order fulfillment are opportune times to invest with them.

A limit order can have extra criteria attached to it, such as how long it will be open. Only when all the shares you intend to trade are available at your price limit will an “all or none” (AON) order be executed. Even if the order is not fully filled, a “good for day” (GFD) order will expire at the conclusion of the trading day. When an order is labeled as “valid till canceled,” it remains in effect until the consumer cancels it or the order has expired, which could take anywhere from 60 to 120 days.

Good To Know Information:

• Though the price you’ll obtain with a limit order is guaranteed, there’s no guarantee that the order will even be completed at all. After market orders have been filled, you can place a limit order only if the stock price remains within your predetermined limits long enough for your broker to execute the trade.
• In terms of commissions, limit orders can be more expensive than market orders for investors. You can continue filling out a limit order if it can’t be completed in one sitting or throughout one trading day, but you’ll still have to pay transaction expenses. The trade will not be performed if the stock does not reach the level of your limit order by the time it expires.

5. Enhance your stock portfolio

We all hope that your first stock purchase is the start of a lifelong journey of successful investing, but if things get rough, remember that every investor, including Warren Buffett, goes through tough moments. The key to long-term success is to maintain your perspective and focus on the things you can control. Market fluctuations are not one of them. However, you do have some control over a few things.

Once you’ve mastered the stock purchase process, you can start exploring other aspects of the investment world. How will mutual funds fit into your investment strategy? Have you established a retirement account, such as an IRA, in addition to a brokerage account? Opening a brokerage account and purchasing stocks is a good start, but it is only the beginning of your investment journey.