How Do I Buy Stocks Online Without A Broker – To buy shares, you typically need the help of a stockbroker, as you cannot simply call a stock exchange and ask to buy shares directly. When you use a stockbroker, whether it’s a human or an online platform, you can choose the investment you want to buy or sell and how the trade will be handled.
In this spirit, there are two broad categories of brokers to choose from: a full service broker or an online/discount broker. Below we discuss how you can use these options to trade stocks on your own.
How Do I Buy Stocks Online Without A Broker
We’ll also talk about a third option: the direct share purchase plan (DSPP), which allows investors to get shares directly from certain public companies. This lets you buy stocks online without a broker; however, this option is limited in its usefulness as you must maintain DSPPs in each company you own shares in, rather than having your entire portfolio gathered in a single location. In addition, many online brokers today offer commission-free stock trading, often making this an easier and more cost-effective solution.
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Most of the time, stocks are listed and traded on exchanges, licensed venues where buyers and sellers meet, often with the assistance of a broker or other intermediary. These intermediaries will be members of the exchange and use their access to buy and sell shares on your behalf. Major exchanges in the United States include the New York Stock Exchange (NYSE) and the Nasdaq market.
Smaller companies with less liquid stocks and minimal market capitalizations (sometimes called penny stocks) can alternatively trade over-the-counter (OTC) on more loosely regulated platforms such as the OTC Pink Sheets. Shares of these companies are often more volatile and risky, so investors choosing to trade in the OTC market should engage in extra due diligence and understand the risks involved.
Full-service brokers are what some people visualize when they think of investing – well-dressed business people sitting in an office chatting with clients. These are the traditional stockbrokers who will take the time to get to know you personally and financially.
They will look at factors such as marital status, lifestyle, personality, risk tolerance, age (time horizon), income, assets, debt and more. By getting to know as much about you as they can, these full-service brokers can help you develop a long-term financial plan.
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These brokers can not only help you with your investment needs, but also help you with estate planning, tax advice, retirement planning, budgeting and any other type of financial advice – hence the term “full service.” They can help you manage all your financial needs now and well into the future and are for investors who want everything in one package.
In terms of fees, full-service brokers are more expensive than discount brokers, but the value of having a professional human investment advisor by your side can be worth the extra cost. Accounts today can be set up with as little as $1,000. Most people, especially beginners, would fall into this category in terms of the type of broker they need.
Those who want a set-it-and-forget-it approach to investing but don’t have the money or time to hire a full-service broker can opt for a roboadvisor. These are algorithmic investment platforms that you can manage through an app or website at a fraction of the cost of a traditional financial advisor.
Online/discount brokers, on the other hand, do not provide investment advice and are basically only order takers. They are much cheaper than full-service brokers, as there is typically no office to visit and no certified investment advisors to assist you. The costs are usually based on one transaction per transaction, and you can typically open an account over the Internet with little or no money. When you have an account with an online broker, you can usually just log on to their website and into your account and be able to buy and sell stocks instantly.
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Remember that since these types of brokers absolutely do not provide investment advice, stock tips or investment assistance of any kind, you are on your own to manage your investments. The only help you will normally receive is technical support. Online (discount) brokers offer investment-related links, research and resources that may be helpful. If you feel that you are knowledgeable enough to take on the responsibility of managing your own investments, or if you don’t know anything about investing but want to teach yourself, then this is the way to go.
The bottom line is that your choice of broker should be based on your individual needs. Full-service brokers are great for those willing to pay a premium for someone else to look after their finances. Online/discount brokers, on the other hand, are good for people with little start-up money who want to assume the risks and rewards of investing on their own without professional assistance.
Sometimes companies (often blue-chip companies) will sponsor a special type of program called a direct stock purchase plan (DSPP). DSPPs were originally conceived generations ago as a way for companies to let smaller investors buy ownership directly from the company. Participation in a DSPP requires an investor to engage directly with a company rather than with a broker, but each company’s system for managing a DSPP is unique.
Participating companies will offer their DSPP through transfer agents or another third-party administrator. To learn more about how to participate in a company’s DSPP, an investor should contact the company’s investor relations department.
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Once you’ve chosen your brokerage platform, you’ll need to create and fund an account before you can start trading. Today, it is easier than ever to link a bank account online and transfer funds, or electronically transfer an existing brokerage account to another firm. You can also choose to make recurring deposits into your brokerage account to grow your portfolio on a regular basis.
Once funded, simply go online or call your broker to make a trade. Stocks are designated by a unique ticker symbol, a one- to four-letter mnemonic assigned to a particular company. MSFT, for example, is the ticker for Microsoft Inc., and AAPL is the ticker for Apple Inc. If you don’t know the ticker on your stock, it’s easy to look it up online or through your broker.
When you select the stock ticker that you would like to trade, you will be greeted with a price quote, a set of information about the stock’s price and activity. This will show you the last price at which the shares traded, as well as a bid and an offer. The bid is the highest price at which someone in the market will buy a share (and thus the best price you can sell to them). The bid, or ask, is the lowest price that someone in the market is willing to sell at (and thus the best price you can buy from them). The difference between the bid and ask prices is known as the spread. A narrower spread typically indicates that the market for the stock is quite active and liquid. A larger spread indicates the opposite. After considering the price offer, you can place your order.
Market orders are the most basic type of order and will give you immediate execution at the prevailing market price. A limit order, on the other hand, allows you to set a specific price at which you can buy or sell. If the price never reaches that limit level, the trade will remain active until cancelled. Many such trades are day orders that will remain good until the end of the trading day. If you want the order to be active only for a short time, you can indicate with your broker that it is immediate or cancel (IOC) instead. Alternatively, if you want the order to remain in effect for more than one day, you can indicate that it is good until canceled (GTC). Other conditions can also be placed on an order, such as a stop-loss.
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When your trade is completed (in whole or in part), you will receive a fill – a summary of your order’s details.
You must be at least 18 years old in the United States to open a brokerage account and trade stocks. For a person under the age of 18, a parent can set up a custodial account on their behalf.
Yes. Several online brokerage platforms (such as Robinhood) offer commission-free trading on most stocks and exchange-traded funds (ETFs). Note that these brokers still make money from your trades, but by selling the order flow to financial firms and lending your stock to short sellers.
The easiest way to get a trade done is to open and fund an online account and place a market order. Although this is the fastest way to buy stocks, it may not always be the wisest. Do your own research before deciding what type of order to place and with whom.
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Usually, you need to open an account with a broker to buy and sell stocks online. However, some listed companies offer a direct share purchase