HOW TO BUY STOCKS IN 5 STEPS
- KidVestors
- Apr 9
- 6 min read
Investing in the stock market can seem like a big, intimidating world. We mean, the ups and downs, the fancy jargon, and all those numbers flying around—it can feel like you need a PhD just to understand it! But buying stocks is not as complicated as people often make it seem. In fact, it's pretty straightforward once you break it down into simple steps.
Whether you're a teenager wanting to get a head start on building wealth or an adult ready to dip your toes into the world of stocks, we're here to guide you through the process. By the end of this, you’ll feel confident and ready to make your first stock purchase!
Before we dive into the steps, let's first understand what a stock is, how it works, how to buy stocks, and why you should consider investing in them.
What is a Stock and How Does it Work?
At its core, a stock represents partial ownership of a company. When you buy a stock, you're essentially buying a small piece of that company. As a shareholder, you benefit when the company does well (through things like dividends or stock price increases), but you also bear the risk if the company doesn’t perform as expected.
Stocks can be thought of as tiny slices of a business. If you buy a share of Apple, for example, you’re owning a piece of Apple, Inc. As Apple’s value goes up, so does the value of your share. If it goes down, your investment loses value.
And that's the essence of investing: buying ownership in a company that you believe will grow in value over time. Simple, right?
Now that you know what stocks are, let’s get down to the nitty gritty.
How To Buy Stocks In 5 Steps
Step 1: Open a Brokerage Account
Before you can start buying stocks, you need to open a brokerage account. A brokerage account is an account that allows you to buy and sell stocks and other securities. It's the gateway to entering the stock market. Think of it like a bank account, but for your investments.
Examples of brokerage accounts to consider:
Charles Schwab: A popular choice for beginners, offering a lot of educational resources.
E*TRADE: Known for its easy-to-use platform and excellent customer service.
Fidelity: Offers a wealth of research tools, plus no-fee trades for stocks and ETFs.
Robinhood: A simple app with a clean interface—great for those just starting out.
Pro tip: Some brokerages allow you to invest in fractional shares, meaning you don’t need to buy a whole share of a stock like Apple ($AAPL) or Amazon ($AMZN). You can buy a fraction of a share, which is perfect if you're starting with a small amount of money. For example, if a share of Tesla costs $900 and you only have $100, you can still buy a fraction of a share!
Important Note for Young Investors:
If you're under the age of 18 or 21 (depending on your state), you will need a parent or guardian to open a custodial brokerage account on your behalf. This type of account allows an adult to manage the investment until you come of age to take control yourself. But don’t worry—this just means you can start learning about investing and building wealth with your parent or guardian’s help.
Step 2: Transfer Money to Your Account
Once you’ve opened your brokerage account, it’s time to fund it. You’ll need to link your bank account to your brokerage account. This is how you’ll transfer the money you want to invest.
Important note: Transferring money into your brokerage account is NOT the same as investing. At this point, you’re just moving money from one account (your bank) to another (your brokerage). The actual investing comes next!
Make sure to only transfer the money you’re comfortable with investing. You don’t want to risk money you might need for short-term expenses.
Step 3: Now It’s Time to Buy
Alright, the money’s in your brokerage account, and you’re ready to make your first purchase. But before you hit that "Buy" button, here’s what you need to consider:
Know your risk tolerance: Consider how much risk you're comfortable with. Risk tolerance is all about how willing you are to potentially lose money. If you're new to investing, it's a good idea to start with lower-risk options like Exchange-Traded Funds (ETFs) or well-established companies. These are generally safer compared to individual growth stocks, which can be more volatile and risky than index funds or ETFs.
Here are a few stock options you can consider:
Individual Stocks: If you're interested in owning part of a specific company, you can invest in individual stocks. Popular ones include:
Apple ($AAPL)
Tesla ($TSLA)
Amazon ($AMZN)
NVIDIA ($NVDA)
Exchange-Traded Funds (ETFs): These are funds that hold a basket of stocks and are often less risky than investing in individual stocks. Some popular ETFs include:
SPDR S&P 500 ETF ($SPY)
Invesco QQQ ETF ($QQQ)
Vanguard Total Stock Market ETF ($VTI)
Vanguard Information Technology ETF ($VGT)
Now that you know what to buy, search for the company or ETF you’re interested in through the brokerage platform. Enter the number of shares or fractional shares you want to purchase, and hit the “Buy” button!
Step 4: You’re Done! Congrats, You've Made Your First Investment !
Congrats! You’ve just made your first investment. You’ve officially joined the ranks of investors who believe in building wealth through stocks.
Celebrate your win! This is a huge first step toward achieving financial freedom. As your investments grow, you’ll start to see how compounding works—reinvesting your earnings to generate even more returns over time. The earlier you start, the better!
Step 5: Dollar-Cost Averaging (DCA)
Here’s a pro tip: if you can afford it, consider setting up automatic transfers into your brokerage account. This is called dollar-cost averaging.
With dollar-cost averaging, you invest a fixed amount of money at regular intervals (weekly, monthly, or quarterly). No matter what the market is doing, you're investing consistently. It’s like paying yourself first, but instead of a savings account, you’re putting your money in stocks.
This approach helps you avoid trying to time the market (which can be stressful and almost impossible to get right). By investing regularly, you smooth out the ups and downs of the market over time, which could help reduce the risk of making poor decisions during a market downturn.
How KidVestors Can Teach You How To Invest In Stocks Risk-Free
If you're thinking, “This all sounds great, but I’m not sure I want to risk my money just yet,” no worries! KidVestors has you covered.
We know that learning about investing can be a bit intimidating, which is why we’ve created a stock trading simulator to help you (and your kids) practice trading without any risk. Using virtual currency, you can buy and sell stocks, track performance, and get the feel of the market—all without risking real money.
Our platform is designed to make stock trading fun and educational, giving you the confidence to dive into real investing when you're ready. Plus, it’s a great way to introduce your kids to the concept of investing in a low-stakes environment.
Check out KidVestors' stock trading simulator on our platform and start practicing today! You can learn how to buy stocks, track your progress, and experience the stock market like never before—all with virtual currency. (No real money lost here!)
Final Thoughts
Investing in stocks doesn’t have to be complicated. By following these five simple steps—opening a brokerage account, transferring money, selecting your stocks or ETFs, making your first purchase, and setting up a dollar-cost averaging plan—you’ll be on your way to building wealth for the future.
Remember, it’s all about starting early and being consistent. The sooner you start, the more time your money has to grow through the power of compounding. And if you’re just getting started, don’t worry—KidVestors is here to help you learn and practice every step of the way!
Happy investing!
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