It can be a minefield knowing how to buy stocks online. Plenty of providers are more than willing to facilitate your investment. However, finding the one that works for you should be the key determining factor. Even though retail traders used to operate in this market before the internet, the advances that the internet has brought to society have completely changed the game.
The ever-expanding industry is big business for stockbrokers. It is essential to filter out the platforms with higher fees or will charge you more for the type of trading you undertake. For instance, if you are a day trader who executes more trades than a swing trader, you want to examine the individual fees. Some brokers will charge a flat rate for specific packages.
Day trading includes different types of methods, such as scalping. Of course, you can scalp in other markets such as forex, too – but make sure you notice the fees you are charged are crucially important. We appreciate you may have already grasped this concept and are saying to yourself, “Yes, but how can I buy stocks online?” – don’t worry. We will be looking at the key things you should do when you buy stocks online and how you can make the most of your trading journey.
Can I Buy Stocks Online?
Yes, it isn’t just institutional traders that can buy stocks. However, they are the ones that move the market more than retail traders. A retail trader is somebody like you or me who uses their savings as their capital to try and turn a profit on the stock market. Recent reports have shown that this type of trading has hit an all-time high in trading volume.
Often it is traders who trade outside of their full-time job. This can be more problematic, particularly in stock trading, as the stock market is open solely between business hours. Of course, you can still trade outside these hours, but it is a different type of trading than operations during a trading day.
Other markets, such as forex or cryptocurrency, are open 24 hours daily. For example, the forex market isn’t active over the weekend, but the cryptocurrency market is available 24/7. Traders have more flexibility in these markets if they have a full-time job. Still, it can also be detrimental, as other major financial hubs in different timezones can cause peaks and dips at inopportune moments.
An institutional trader is somebody who trades professionally. This can range from portfolio managers to large investment banks such as Goldman Sachs, JP Morgan or Deutsche Bank. Institutional traders who operate on the trading floors of some of these financial behemoths will manage risk in the tens, sometimes hundreds of billions.
Being aware of how much pull these markets have is vital to note. Even if you are trading with a sizeable portion of your net wealth, you are still a drop in the ocean compared to these companies.
Finding Your Feet In The Market
The stock market is one of the more traditional markets. However, individual financial hotspots can see multi-billion-dollar trading volume daily. This is exciting as a retail trader, and the wealth of opportunity in this market drives you to find out how to buy stocks online.
Before you begin to place your hard-earned money on an exchange to purchase stock, starting with small steps is a good idea. For example, find out the sort of news that drives the market. You can do this by following some prominent stock traders on social media. In addition, you can subscribe to a reputable finance magazine to get a better indication of what drives the price action.
Finding an online stockbroker that provides you with plenty of information on buying and selling stocks online instead of just looking to obtain a sign-up fee is a good start. There are plenty of reputable stockbrokers online, depending on the type of trading you want to implement into your overall trading psychology.
Another good point is that you should focus on simplistic strategies at first, such as spot trading. Then, once you have a good grasp of the market and understand basic concepts, you can look at more specialist instruments such as options trading or futures.
You must understand that even if you begin to grasp how the market works, you can still lose your money trading. So your capital is always at risk, and futures trading, in particular, carries much more risk than standard trading. This is one of many lessons in learning how to buy stock online.
How Do I Buy Stocks Online?
There are hundreds of reputable websites online. Some banks offer a facility through specialist accounts. You can also use free trading platforms. Robinhood and Charles Schwab are two examples of online brokers that allow you to buy stock online without paying fees upfront or any commission on your trades.
An online stockbroker is the most straightforward way of buying stocks. Irrespective of whether you want to trade or hold for a considerable period as a long-term investment.
Although online stockbrokers are the most popular way for retail traders looking to buy stocks online, there are other avenues.
A Full-Service Stockbroker
Many wealthier clients will opt for the services of a full-service stockbroker. This is because they often act as middle management for their wealth. A full-service stockbroker is a financial professional who provides various services and advanced coverage when looking to buy stocks online. These services include but are not limited to
- Investment Advice
- Portfolio Management
- Research And Analysis
- Trading Execution
- Retirement Planning
- Tax Advice
- Estate Management
Large financial institutions such as investment banks or prominent brokerage firms employ these stockbrokers. Generally speaking, if you are just starting, plenty of online stockbrokers do not charge a fee, and their platforms and mobile apps are easy to use. A full-service stockbroker is usually for a small percentage of incredibly wealthy clients.
If the idea of a full-service stockbroker interests you but you are scared by their high rates, a discount broker might be a better option for you when looking at how to buy a stock online.
Discount brokers offer a similar service to full-service brokers but provide a less comprehensive service for a smaller fee. Due to the explosion of retail traders looking to enter the market but with limited knowledge, the discount broker sector has become more prevalent for investors looking to buy stocks online in recent years.
Given that their management fees are lower, and in some cases, the administrative costs are minuscule, this can be the perfect middle ground for beginner retail traders. Using an avenue of tried and tested professionals who have proven experience in how to buy online stocks is a wise move for people who are still getting to grips with how the intricacies of the market work.
Can I Buy Stocks Online Directly From The Company?
Maybe you want to be more hands-on and don’t want to employ the services of a middleman or an online stockbroker. Many corporations allow you to do this if you’d instead go directly to the company. Depending on the company’s size, some will offer stock to existing employees.
If you are not fortunate enough to have a job at Apple, you can buy stock directly from them or any other company that provides the facility. You can do this via two methods:
- A Direct Stock Purchasing Program (DSPP)
- A Dividend Reinvestment Plan (DRIP)
If you use either of these methods to buy stocks online, you can detour around fees you can accumulate through some brokerages and interact with your company of choice directly.
Stock buybacks are another method that big corporations use. This is when they buy back stocks to conserve the stock price or dilute volatility. When a company instigates a buyback, they usually have more stocks to purchase directly if you want to use something other than a broker.
How To Buy Stocks Online With Small Capital
“Small capital”, by definition, is subjective. Small capital to Goldman Sachs could be $50 million, and significant capital to a retail trader could be $500. This depends on your situation. No two traders are the same, and some people who buy stocks online are more adept to the risk management aspect of trading and investing. It is challenging to understate just how vital effective risk management can be if you’re a beginner.
Buying stocks online doesn’t matter if you’re looking for a quick short-term profit or a long-term investment. So long as you implement plenty of risk management into your approach, you can help insulate yourself from volatile market conditions.
Stocks don’t have the same level of risk and volatility as other markets, such as cryptocurrency. However, certain stocks can, and if you invest in penny stocks, for example, these investments are notoriously volatile for misselling and fraud, such as the infamous Wolf of Wall Street.
This is why market research is so important. So long as you know how to handle the risk and what to look for, you should be able to build yourself a decent portfolio.
Can I Use A Mentor To Help Me Buy Stocks Online?
Yes, of course, if you are looking to enlist the help of a specialist, you can do this across a range of markets. If you are trading forex, for instance, you can look to onboard a mentor to help you navigate the markets to give you a better understanding. However, plenty of stockbrokers offer this facility if you want to buy stocks online.
Firstly, you must ensure the mentor is the right person for you. For example, do they have a proven track record? Do they use risk management tools properly? Do other traders recommend their service?
A full-service broker can act as a mentor, but they are essentially fund managers. A mentor is a teacher who will one day direct you into navigating these turbulent markets for yourself. Therefore, picking wisely could be the make-or-break decision which turns your stock trading venture into a success or a failure.
Where Do I Buy Stocks That Interest Me?
Stockbrokers can tailor many of the methods we have discussed today to suit your needs. For example, online stockbrokers can recommend certain shares depending on what type of market you want to invest in. If you’re looking for ESG investments, stockbroking platforms and stockbrokers that are more hands-on will be able to recommend various investments.
You are at an advantage if you can control your emotions and follow your plan. This is the number one reason retail traders lose money. We understand that watching your portfolio depreciate rapidly is uncomfortable.
So long as you use the money you can afford to lose and understand that your capital is always at risk, you can buy stocks online with a clearer head. However, irrespective of how well you know the markets, you can still lose your investment, so it is important not to overcommit funds when buying stocks online.
Knowing how to buy stocks online is an essential step on your journey. Remembering that there are no shortcuts when trading or buying stocks online means you can approach the challenge with a level head. If you are practical and aim for modest, marginal gains, this is far more realistic than aiming for one big home run.
Take time to weigh up all these options we have discussed today and decide what technique and method is best for you. Once you have decided, you can buy stocks online and hopefully turn them into a passive income stream.