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How to Start Buying Shares of Stock

written by: Tim Plaehn•edited by: Jason C. Chavis•updated: 6/28/2011

Are you wondering: How do I start buying shares of stock? There are several ways to get started and you will find that it is not difficult. All successful stock investors started out with their first share purchases and you can also.

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    Stock Market Potential

    If you are interested in how to purchase shares of stock, you probably have an idea of the investment potential of stocks. The stock market provides an opportunity to multiply your investment amount many times compared to collecting a few percent in interest in bank accounts or other investments.

    As a example, someone who purchased $1,000 worth of Coca Cola stock, symbol KO, on February 1, 1990 would own 8 times as many shares in September 2010, worth $6,700. This investor would have also earned a significant amount in dividends and the shares would be paying over $200 in dividends each year.

    If you are asking how do I start buying shares? You have a couple of ways to get started.

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    Discount Stock Brokers

    Opening an account with a discount stock broker and starting to purchase shares of stock is a relatively simple process. Some brokers will accept initial deposits for as little as $500, but you probably want to start investing with at least $1,000 through a discount stock broker. Commissions to buy stock through a discount broker range from $5 to $10 depending on the broker.

    To buy shares through an online brokerage account you need to know the stock symbol of the stock you want to buy and the number of shares you wish to purchase. The broker's quote screen will help you find companies and their stock symbols. Stocks are purchased in whole share amounts and you can purchase any number of shares for most stocks. When you start buying stocks you may just want to buy 5, 10 or 20 shares of your selected stock.

    The discount brokers make money from the commissions when you buy and sell shares. You will make money by buying shares and holding as they increase in value and pay dividends into your account. As a beginning investor, avoid a lot of buying and selling, chasing hot stocks. Think of yourself as a buy-and-hold investor looking for long term investments.

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    Direct Purchase Programs

    Many companies, especially blue chip corporations and companies that pay regular dividends, offer direct stock purchase programs where you can make regular monthly investments and have your dividends reinvested into more shares of stock. Direct purchase plans are an excellent way to accumulate shares of a particular company over time.

    Direct purchase plans typically allow you to open an account with $250 or set up a regular, automatic purchase plan of $50 per month or more. These investment minimums can vary significantly from company to company, so check the individual plans. As an example, Walgreens offers a direct stock purchase plan with typical features for a blue chip company plan.

    You can find direct purchase plan information through the Investor Relations page of a company's website. If you are planning to invest in any company, one of your first steps should be to become familiar with the information available on the company's Investor Relations webpage.

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    Research Is Most Important

    It is not difficult to start buying stock shares. The difficult part is selecting the stocks to buy. You should spend as much time as you can doing research into a company and its stock history before you buy any shares. You should understand the risks and potential of any stock market investment before you invest.