How to Buy Stocks

A practical walkthrough for first-time investors: picking a brokerage, opening an account, placing your first trade, and knowing what you're actually buying.

Step 1: Choose a brokerage

A brokerage is the platform that connects you to stock markets. You open an account there, deposit money, and use it to place trades. Most major brokerages in the US are now commission-free for standard stock and ETF trades, meaning you pay $0 per trade rather than the $5–$10 fees that were standard before 2019.

Here are the most widely used options for retail investors. All of them are regulated by FINRA and carry SIPC insurance up to $500,000, which protects your assets if the brokerage itself fails.

Step 2: Open an account

Opening a brokerage account takes around 10–15 minutes online. You'll need a few things ready before you start.

What you need

• Social Security number (SSN) — required by US law for tax reporting. Foreign nationals can use an ITIN instead.
• Government-issued photo ID — a driver's license or passport. Used to verify your identity under Know Your Customer (KYC) regulations.
• US address — the brokerage needs a mailing address for account documents and tax forms (1099s).
• Bank account details — your routing number and account number to fund the account via ACH transfer. You can usually find these at the bottom of a check or in your online banking app.
• Employment information — your employer, occupation, and income range. Brokerages collect this for regulatory purposes and to determine appropriate margin limits.

Once you submit the application, most brokerages approve accounts within a few minutes. You can then link a bank account and initiate a transfer. ACH transfers typically take 1–3 business days to settle, but many brokerages give you instant buying power up to a limit (often $1,000–$25,000) while the transfer completes.

Account types: taxable vs tax-advantaged

When you open an account, you'll choose an account type. The most common account types for new investors are:

• Individual brokerage (taxable) — a standard account with no contribution limits and no restrictions on withdrawals. You pay capital gains tax when you sell investments at a profit.
• Roth IRA — a retirement account funded with after-tax money. Your investments grow tax-free, and qualified withdrawals in retirement are also tax-free. The 2026 contribution limit is $7,500 per year ($8,600 if you are 50 or older). Income limits apply.
• Traditional IRA — contributions may be tax-deductible depending on your income and whether your employer offers a retirement plan. Growth is tax-deferred; you pay income tax on withdrawals in retirement. Same contribution limits as a Roth.

If you expect to be in a higher tax bracket in retirement than you are now, a Roth IRA tends to be more valuable. If you expect the opposite, a Traditional IRA may be better. When in doubt, the Roth is a common starting point for younger investors. Tax rules and income limits vary by situation; consult a tax professional before making decisions about account type.

Step 3: Find a stock and place a trade

Once your account is funded, you can place a trade. You search for the stock you want by its ticker symbol (e.g. AAPL for Apple, MSFT for Microsoft) and specify how many shares you want to buy and what type of order to use.

Market orders vs limit orders

The two most common order types are market orders and limit orders. Understanding the difference will prevent you from getting a surprise on your fill price.

There are other order types (stop-loss, stop-limit, trailing stop), but market and limit orders cover the vast majority of what retail investors need. Master these two first.

Buying vs selling

Buying a stock means purchasing shares in the open market. You become a partial owner of that company and participate in its gains and losses.

Selling means returning those shares to the market in exchange for cash. The difference between what you paid and what you sell for is your gain or loss. If you hold the shares for more than one year before selling, your profit is taxed at the long-term capital gains rate (0%, 15%, or 20% depending on your income), which is lower than the short-term rate (ordinary income rates up to 37%).

You don't have to sell all of your shares at once. You can sell a portion and hold the rest.

ETFs vs individual stocks

This is the most important decision new investors face. Both are available on every major brokerage.

For most new investors, starting with broad index ETFs is the right move. A core holding like VTI (total US market) or VOO (S&P 500) gives you market-rate returns with minimal effort. The research is clear: most active fund managers fail to beat simple index funds over long periods. Individual stock picking on top of a solid ETF core is a reasonable approach once you have a foundation.

Popular ETFs to know

• VOO / SPY / IVV — S&P 500 index ETFs. Tracks the 500 largest US companies. The most common core holding for US investors.
• VTI / SCHB — Total US stock market. Adds mid- and small-cap companies to the S&P 500 mix.
• VXUS / VEA / VWO — International stocks. A complement to a US-focused portfolio.
• QQQ — Nasdaq-100. Heavy technology weighting. Higher potential returns and higher volatility than a broad S&P 500 fund.
• BND / AGG — Broad US bond market. Lower risk and lower return than stocks; often used to reduce overall portfolio volatility.
• VIG / SCHD — Dividend growth ETFs. Focus on companies with a history of increasing dividends.

401(k) investing: your employer's plan

A 401(k) is a retirement savings plan offered by employers. Unlike a brokerage account, you don't choose the platform; your employer selects it. Common 401(k) providers include Fidelity, Vanguard, Empower, Principal, and Transamerica.

Contributions are made from your paycheck before taxes (traditional 401(k)) or after taxes (Roth 401(k), offered by many employers). The 2026 contribution limit is $24,500 per year ($32,500 if you are 50 or older).

The employer match

A typical employer match is something like "50% of your contributions up to 6% of your salary." That means if you earn $60,000 and contribute 6% ($3,600/year), your employer adds $1,800. Contribute less than 6% and you forfeit some of that $1,800.

What to invest in inside a 401(k)

401(k) investment options are limited to whatever funds your plan offers, usually a set of mutual funds and sometimes ETFs. Look for low-cost index funds from Vanguard, Fidelity, or Schwab. Target-date funds are also common and reasonable for a hands-off approach.

• Target-date funds — automatically shift from stocks toward bonds as you approach retirement. A 2055 fund, for example, is aggressive now and gradually becomes more conservative as 2055 approaches. A simple, sensible default.
• S&P 500 index funds — if your plan offers one with a low expense ratio (under 0.10%), this is often the best single choice for a long time horizon.
• Avoid high-fee actively managed funds — expense ratios above 0.5%–1% will meaningfully reduce long-term returns. In a 401(k) with limited options, the expense ratio is the most important factor to check.

IRA vs 401(k): which to prioritize

A common recommended order for most investors:

• Contribute to your 401(k) up to the employer match (free money first).
• Max out a Roth IRA if you are eligible ($7,500/year in 2026). A Roth IRA typically offers more investment choices and lower fees than most 401(k) plans.
• Return to your 401(k) and contribute up to the annual limit ($24,500 in 2026).
• After maxing both, use a regular taxable brokerage account for additional savings.

A note on fractional shares

Many brokerages now allow you to buy a fraction of a share. If a single share of Amazon costs $200 and you only have $50 to invest, you can buy 0.25 shares. Fidelity, Schwab, Robinhood, and Public all support fractional shares. This removes the barrier of high per-share prices and lets you invest any dollar amount regardless of share price.

Summary: your first steps

• Open an account at Fidelity, Schwab, or Vanguard.
• Choose a Roth IRA if you are under the income limit, or a taxable brokerage if you have already maxed your IRA.
• Link your bank account and transfer your initial deposit.
• Consider a broad, low-cost index ETF or target-date fund as a starting position. Common examples include VOO, VTI, and target-date funds offered by your brokerage.
• If your employer offers a 401(k) with a match, contribute at least enough to capture the full match before doing anything else.
• Research individual stocks when you are ready to go beyond the index.