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In the old days, if you wanted to buy a stock you had to do so through a broker. They were difficult to get a hold of, trades were slow, knowing the value of your holdings was hard, and most charged significant fees.
With the rise of internet banking, you might find yourself wondering how to buy stocks online without a broker. Thankfully, there are a number of ways that you can buy stocks online, all on your own.
Some methods will work better for people who like researching stocks (read InvestmentZen’s list of the best stock research websites) and who want to be hands-on with their investments. Others are great for those who want a more hands-off approach.
Online Brokerage Accounts VS Broker
The most basic way to buy stocks online (without a broker) is through a brokerage account. Despite the similarity in their names, brokerages are not brokers. You don’t have to call someone to execute a trade. All you have to do is log-in to your online account and deposit money. Once you’ve done that, you can buy and sell stocks with a few clicks of your mouse.
How To Buy Stocks Online Through A Brokerage Account
When you buy a stock in your brokerage account, you need to provide the ticker symbol of the stock. That’s the unique identifier for the company you want to purchase. The Coca-Cola company, for example, has the ticker symbol KO.
Once you’ve decided on the stock you’d like to buy, you have to decide how many stocks you’d like to purchase.
Then, you must decide whether you are placing a market order or a limit order.
A market order will occur immediately at whatever the market price is. You will immediately purchase the stock, so long as someone is selling, but you might pay more than you expect, especially if the stock is not traded very often.
Limit orders let you specify the maximum you’re willing to pay. When you place a limit order, you’ll immediately purchase the stock at the lowest price available, so long it is under the limit you specify.
For example, you place a limit order for one share KO at $50. If someone is selling a share at $42, and someone else is selling a share at $47, you’ll buy the share for $42. If the only person selling a share is asking for $52, your purchase will not go through.
When you go to sell, you’ll have the same options. When you sell using a market order, it will be sold for the highest price that anyone is offering, though that might be less than you expect on low volume stocks. Sell-limit orders will only be sold if someone is offering at least the minimum you specify.
Most brokerages charge a fee for each transaction, buying and selling, so you’ll need to factor that into your return expectations, especially when you’re buying or selling a relatively small number of shares. The fee will be the same whether the transaction involves one share or one hundred.
If you’re considering opening a brokerage account, check out our comparison page here.
Invest in Multiple Stocks at Once with Motif Investing
If that explanation of how to buy stocks without a broker seems confusing, there is another option that will let you purchase multiple stocks at the same time, and pay fewer transaction fees.
Motif Investing lets you purchase as many as thirty stocks at once by buying a “motif” of companies’ shares.
Motifs are designed to reflect a specific theme, such as blue-chip companies, manufacturing, or the banking industry. You can also find motifs focused on more specific themes than just industry, such as tech companies that build components for tablets, or companies involved in automated cars.
The money you invest in a motif is automatically split amongst the stocks in the motif so you don’t have to purchase each one individual or worry about how to weight each company in your portfolio. Motif investing gives you many of the benefits of investing in a mutual fund or ETF, but you actually own the underlying securities and you have access to a huge variety of specifically focused motifs.
Investing in a motif helps you diversify, which can be difficult to do when buying shares of specific companies through a brokerage, but you should still do your research when investing in a motif of stocks. If your motif focuses on a specific sector of the economy and that sector starts performing poorly, your investments will drop correspondingly. Even if you own shares of multiple companies that do the same type of business, that diversification isn’t as effective as owning shares in entirely unrelated companies.
Using a Robo-advisor for Hands-Off Stock Purchasing
If you want truly hands-off investing, a robo-advisor might be the right choice for you.
When you sign up with a robo-advisor, such as Betterment, you’ll fill out a short survey to help the program assess your investment needs and your risk tolerance. Once you approve of the assessment, all you need to do is send your investable cash to the robo-advisor. The program will do the rest, automatically diversifying by purchasing a wide variety of stocks, bonds, mutual funds, and ETFs.
The program will automatically rebalance your portfolio, so all you have to do is keep sending money to the account and check the balance occasionally. The only maintenance you have to do is updating the robo-advisor with information on your changing investment needs or risk tolerance.
Robo-advisors, like Betterment, also offer additional services, like tax-loss harvesting, which can help you save money during tax season and keep more of your money working for you. Depending on your balance, you’ll also get access to human financial planners who can look at the specifics of your situation and help you make important financial decisions.
These benefits do come with a fee, usually a percentage of your total assets under the Robo advisors management. So, if you have $100,000 invested and the robo-advisor charges a .25% management fee, you’ll be paying $250 to keep your money invested. It’s up to you whether the service is worth that, but it is far cheaper than a traditional financial advisor. Betterment claims that its automated tax-loss harvesting service can improve your returns by more than .5%, so in some cases, the fee might be more than paid for by the extra returns the robo-advisor brings.
Special offer: For InvestmentZen readers, Betterment is currently offering up to 1 year managed for free if you sign up here.