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I Want To Buy Shares In An Individual Company. What Do I Do?
If you’ve always wanted to invest in stocks but are intimidated by learning how to buy shares of a company, this is the place to start. Deciding how to invest in a specific company requires a bit of research and some basic knowledge of how the process works, but with modern online brokerages available to download on your smartphone, investing has never been easier.
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How to buy shares in a company
- Decide which method you’re going to use to invest. There are many stock traders to choose from and with modern technology, buying stocks is now as simple as choosing an online brokerage and creating an account, typically by visiting the brokerage’s website or downloading an app.
- Set up an initial balance. This is usually done by depositing money into your trading account. Our advice: start small and add more as you grow comfortable with the process.
- Choose the companies you’d like to invest in. Coming up with a strategy for choosing stocks is a major part of learning how to buy shares of a company. To give you a few pointers, we’ll go over how to evaluate stocks in a bit.
- Decide how many shares to buy. If it’s your first time investing in a particular company, think about starting with a small investment and putting more in once you’ve watched the stock perform for a while. This is especially true if you’re new to investing. For new investors, one popular option is buying fractional shares. This allows you to buy less than one share of a company, which is particularly useful if you’re looking at companies that trade at hundreds or thousands of dollars per share.
- Make the purchase. There are two types of stock trades: market orders and limit orders. With market orders, you’ll agree to buy the stock at its current best price. With limit orders, you’ll choose the price you want to pay and the purchase will be automatically made once the stock reaches that price.
- Manage your portfolio. As you become more comfortable with buying and selling shares, you’ll learn how to invest in specific companies to optimize your stock portfolio. Over time, you can see how your stocks perform and make adjustments as you see fit.
Best options for buying shares in a specific company
As a stock trading app that charges no commission, is one of the more popular options for beginning traders who are just learning how to buy stocks in a company. However, seasoned investors use the app, too. Robinhood makes money by offering premium upgraded services and by earning interest on the balances invested by its users. There’s virtually no minimum to invest in the Robinhood Gold subscription and fractional shares are offered.
With a paid Robinhood Gold subscription, you can also trade on margin, meaning you can borrow money to buy stocks. Accounts for margin trading are also required to be funded at a minimum of $2,000 per FINRA guidelines. While other online brokerages offer this service, Robinhood’s is unique in that the company doesn’t charge interest but instead sets a flat monthly fee.
Like Robinhood, TD Ameritrade also doesn’t charge commission on stocks listed on a US exchange, although a $6.95 fee is charged on over-the-counter stocks which are either listed on a foreign exchange or not listed at all. TD Ameritrade offers great educational tools that can be incredibly useful to beginners who want to learn how to buy shares in a company wisely. There’s no minimum required to open an account and trade stocks, although minimums may be required for other investment option. Unfortunately, TD Ameritrade doesn’t allow users to buy fractional shares at this time.
Interactive Brokers is a third option for new investors with no account minimums and, similar to TD Ameritrade, no commission on US-listed stocks with its IBKR Lite service. Fractional trading is also allowed with an Interactive Brokers account. However, with the online brokerage’s structure and features, it’s a better option for those who are more serious about investing. The trading platform isn’t as self-explanatory as others that are more geared towards beginners. Once you start trading more actively and outgrow the limitations of other trading apps, you may find that Interactive Brokers is a more suitable option; just keep in mind that account inactivity can lead to significant added fees with paid accounts.
How to Buy Stocks in 6 Steps
Tips for buying shares
- Start small. You can always invest more, but if you put too much into a stock in the beginning without being sure of what you’re doing and lose money, there’s nothing you can do to get it back.
- Diversify. Choose a number of companies to invest in and spread your funds across these stocks. If one does poorly, you won’t have your entire investment on the line. It’s also a good idea to diversify across different industries, as companies in similar areas like technology or travel can all plummet together when a major event affects that industry.
- Seek advice. There are countless stock trading blogs, advice websites, podcasts and even news programs dedicated to investors. You may even be able to get personalized investment advice through your existing relationship with your bank. However you’re getting information, don’t be afraid to ask questions if you’re not sure about something.
How to evaluate stocks
Investors use a variety of methods to evaluate stocks. Morningstar is considered the industry leader in analysis, offering reports on stocks that include in-depth research and ratings. While most of these detailed reports require a paid account, the service does offer a limited-access free version that allows you to view certain data and articles. You can also try a 14-day free trial to see if the paid service is worth the cost.
With that in mind, you can still do all the research you need on your own. Glance through market news websites to find a list of potential stocks to investigate. Look at the companies’ financial data, including historical earnings per share, which can be found through the Securities and Exchange Commission (SEC) or on the company’s website. You can also evaluate the company’s product quality and demand, current corporate leadership and external factors such as the industry the company operates in and the country or countries where it does business.