In the past, buying stocks required going through a broker, which was often difficult to reach, slow in executing trades, hard to track the value of your holdings, and typically expensive in terms of fees.
With the rise of online banking, you might wonder how to buy stocks online without a broker.
Fortunately, there are several ways you can independently buy stocks online.
Some methods are more suited for those who enjoy researching stocks (check out the list of best stock research sites on InvestmentZen) and want to be hands-on with their investments. Other methods are ideal for those who prefer a more hands-off approach.
Online Brokerage Accounts VS Brokers
The most straightforward way to buy stocks online without a broker is through an online brokerage account.
Despite the similar name, brokerage firms are not brokers. You don’t need to call someone to execute trades. All you have to do is log into your online account and deposit funds. Once that’s done, buying and selling stocks is just a few clicks away. Remember, while it is possible to invest using a credit card, it is usually a bad idea.
You can trade complex financial derivatives in a similar manner—check out the best CFD trading platforms to try it yourself.
How to Buy Stocks Online Through a Brokerage Account
Here’s how to invest online through a brokerage account.
When buying stocks in a brokerage account, you need to provide the stock’s ticker symbol. This is the unique identifier for the company you want to buy. For instance, Coca-Cola’s ticker symbol is KO. If you want to buy Tesla, the symbol is TSLA. If you want Amazon, it’s AMZN, and so on.
Once you’ve finished your research and decided on the stock to buy, you must decide how many shares you want.
Then, you need to decide between placing a market order or a limit order.
A market order is executed immediately at whatever the market price is. You’ll buy the stock right away as long as someone is selling, but you might end up paying more than expected, especially if the stock isn’t traded frequently.
A limit order allows you to specify the maximum price you’re willing to pay. When you place a limit order, you’ll buy the stock immediately at the lowest price available, as long as it’s under your set limit.
For example, if you place a limit order for one share of KO at $50, and someone is selling a share at $42 while another at $47, you will buy it at $42. If the only person selling is asking for $52, your purchase won’t go through.
When selling, you have the same options. A market order when selling will go for the highest price anyone is offering, though for low-volume stocks, this might be lower than you expect. A limit sell order only sells if someone offers at least your specified minimum price.
Most brokerage firms charge a fee for each transaction (buying and selling), so you need to account for this in your return expectations, especially when the number of shares you’re trading is relatively small. The fee is the same whether the trade involves one share or a hundred. Some platforms offer a number of free stocks just for signing up.
If you’re considering opening a brokerage account, check out this comparison page.
Investing in Multiple Stocks at Once with MOTIF INVESTING
If how to buy stocks online without a broker seems confusing, there’s another option that allows you to buy multiple stocks at once and pay less in transaction fees.
Motif Investing allows you to buy up to 30 stocks at once by purchasing “motifs” of company stocks.
Motifs are designed to reflect a specific theme, such as blue-chip companies, manufacturing, or banking stocks. You can also find motifs focused on more specific themes (not just industries), like companies that manufacture tablet components or are involved in autonomous driving cars (e.g., semiconductor stocks).
Your investment in a motif is automatically allocated among the stocks of that motif, so you don’t need to buy each stock individually or worry about how to weight each company in your portfolio. Motif investing offers many of the benefits of investing in mutual funds or ETFs, but you actually own the underlying securities and get exposure to a wide variety of specific themes.
Investing in a motif can help achieve diversification, which might be hard to do when buying stocks of specific companies through a brokerage, but you should still do your research. If your motif focuses on a specific sector of the economy and that sector starts performing poorly, your investment will decrease accordingly. Even if you own shares of multiple companies in the same business, this type of diversification is not as effective as owning completely unrelated companies.
Automated Stock Purchases with Robo-Advisors
If you truly want to take a hands-off approach to investing, robo-advisors might be the right choice for you.
When you sign up for a robo-advisor, like Betterment, you’ll fill out a brief questionnaire to help the program assess your investment needs and risk tolerance. Once you agree to the assessment, all you need to do is send investable cash to the robo-advisor. The program will do the rest, automatically diversifying by purchasing a variety of stocks, bonds, mutual funds, and ETFs.
The program automatically rebalances your portfolio, so all you need to do is continue sending money to the account and checking the balance occasionally. The only thing you need to do is update the robo-advisor with your changing investment needs or risk tolerance.
Robo-advisors like Betterment also offer additional services, such as tax-loss harvesting, which can help you save money during tax season and make your money work for you. Depending on your balance, you might also have access to human financial planners who can understand your specific situation and help you make important financial decisions.
These benefits do come at a cost, typically a percentage of the total assets under management by the robo-advisor. So, if you invest $100,000 and the robo-advisor charges a 0.25% management fee, you’ll pay $250 to maintain your investment funds. Whether this service is worth it depends on you, but it’s much cheaper than traditional financial advisors. Betterment claims its automated tax-loss harvesting service can increase your returns by more than 0.5%, so in some cases, the additional returns from a robo-advisor might be enough to cover the fee.