A brokerage house is one of the first places you can go to buy shares of stock on any of the major stock exchanges. Brokers take orders and, for a fee, conduct all of your transactions. A stockbroker is similar to a real estate agent. Just as you can sell a house without a broker, you can buy and sell stock directly. Trading through an online discount brokerage is less expensive and more self-directed than a full-service broker.
1. Choose between a full-service broker with whom you build a relationship and who provides you with in-depth research on companies selling stock or a discount broker that gives you minimum research services. Online brokers merely provide access and do not provide any guidance.
2. Open an account with a brokerage house. You'll initially make a deposit through which your broker can make withdrawals to purchase stocks for you. Take your stockbroker's advice on which stocks to purchase or choose your own. Look for a broker that takes time to get to know you, your risk aversion level and your financial goals.
3. Give your stockbroker the option of buying and selling shares of stocks on the stock exchange at will. An account manager with open access to your funds can take advantage of big surges that may have a very small window of opportunity without having to call to get your approval. With an open account, however, you should set limits as to how much the broker can use from the account before seeking your approval.
4. Select another option that does not give you direct access to a dedicated stockbroker by registering with an online discount broker. You'll save money on transaction fees when you choose your own stocks. There are five major e-trading companies online as well as a number of smaller discount brokerage houses. The five recognized as the biggest and most stable according to Trade Stocks America, a stock market consultancy, are Etrade, Scottrade, Fidelity, TD Ameritrade and Schwab. Additionally, many full-service brokerage houses, such as Merrill Lynch, offer a menu of broker options through one company.
5. Deposit the minimum required by the brokerage house into an account from which you'll pay for the shares you purchase. Most online trading houses require a minimum deposit that ranges from $500 to $2,000. Fill out the requisite paperwork and forms through which your transactions will be reported to the IRS.
6. Log into the transaction page at the brokerage once your account is set up and enter the stock you want to buy or sell, the number of shares you're buying or selling, and the expected price. Once your transaction has been received, accepted and recorded, you'll receive a verification email.
7. Expect to pay between $9 and $15 every time you buy or sell shares of stocks through an online discount stock account and an average of $10 to $20 through a discount broker. Full-service brokers that provide you with advice and heads-up calls on market fluctuations take a percentage of each trade in commissions that varies depending on the amount of your trades and your relationship with the company.
- Bypass the stock exchanges and call a company directly to be put in touch with the investor relations department, whichcan sell you stocks directly. You won't pay any commissions and you’ll send your payment directly to the company. This method is most effective when you only want to invest in a few stocks because you'll have to call each company directly to buy shares in that company.
- As a private investor acting on your own behalf, you may not have access to the most up-to-date stock prices, nor will you be able to see recent trades and real-time variances as well as your broker can. You usually get better, or at least the most competitive, pricing when you go through a broker with immediate access to the NASDAQ and New York Stock Exchange.
- Jupiterimages/BananaStock/Getty Images