How do I buy stocks?

From FinancialPlanning

This article also applies to ETFs, which are traded the same way as stocks

Let's say you've been following a company for a long time, you have some money set aside, and you think it's time to make a purchase. How do you buy stock?

Almost all stock purchases and sales are done through brokerage firms. These firms range from "full-service brokers" like Merrill Lynch or Morgan Stanley to "discount brokers" like Schwab, eTrade, Fidelity or Scottrade. As the names suggest, the commissions are typically higher (sometimes much higher) with a full-service firm than with a discount broker. In theory that added cost is there to pay for the advice you'll get along with the transaction.

With any of these firms, you first open whatever type of account you need (a taxable brokerage account, Traditional IRA, Roth IRA, etc.), and fund it with an initial cash deposit or securities transferred in from another account. You are then able to purchase stock by placing a trade online or over the phone, using a market order or limit order.

Stock trades in the United States clear in three days ("T+3 settlement"), meaning you must have adequate cash in the account to cover the purchase by that date. Check each brokerage firm for their current pricing, but commissions range from about $5 to $20 per trade for discount brokers, substantially more for full-service firms. See also the FAQ on choosing a discount broker.

Some MIFP readers purchase stocks through DRIPs/DPPs, which have their own FAQ section.