How to Buy Stocks Online for Free

Follow this guide to trade stocks online for free.

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In the 1980s, traders paid an average of about 25 cents per share to buy or sell a stock. Today that has fallen to zero. Yes, zero. Zip. Nada. Commission-free. You can buy stocks online for free. Brokerage Robinhood was one of the first to offer no commissions for stocks. Virtually every major U.S. brokerage followed suit in late 2019. The standard price to trade stocks or invest in exchange-traded funds (ETFs) is now zero.

If you are new to investing or want to escape the fees charged by your old-school brokerage, follow this guide to get started.

1. Open an Account at a Brokerage That Charges No Commissions for Stock and ETF Trades

Stock trades at the majority of brokerages in the U.S. are free, so it's easy to find one. Every investor has different needs. When you're getting started, it's important to understand what you want in a brokerage account. Brokers like Fidelity, Charles Schwab, Ally Invest, and Robinhood, offer a variety of services to customers including, apps, trading platforms, and research materials.

The best brokerage for you will depend on different factors like your needs, goals, and trading style. Check out our post on the best online brokerages to find the right one for you.

You can choose between a traditional brokerage account or a retirement brokerage account like a traditional individual retirement account (IRA) or Roth IRA. Here's a comparison between the two. Retirement accounts offer tax benefits but require you to keep your funds tucked away until you are 59-and-a-half years old to avoid taxes and penalties. Most investors should have both a regular brokerage account and an IRA. You may want both to plan for your long-term financial needs.

2. Fund Your Brokerage Account

Every week I have an automatic $5 transfer from my checking account to my main brokerage account. It's less than the cost of a fast-food lunch, but it adds up to $260 per year. If you are brand new to investing, starting with something small like $5 a week is better than not starting at all.

Retirement accounts have annual limits on how much you can contribute. A regular brokerage account allows unlimited deposits and withdrawals. In fact, some brokerage accounts give you a checkbook and ATM card that are tied to your account.

Some brokerages have a minimum required deposit to open an account. Others let you start with $0 and add money whenever you want. But to buy stocks online, you're going to need funds in your account.

3. Choose a Stock

A share of stock represents a small slice of ownership in a company. When you choose a stock, you are choosing a company you want to own a piece of. Hopefully, you pick a stock that goes up in value. But that isn't always the case. There is a risk that even a good stock could go down after an unfortunate earnings announcement, economic news, or a company scandal.

There are many criteria you can use to pick an investment or trade. You may want to use technical analysis, fundamentals, or other inputs to pick your stock for free. Some investors care a lot about dividends, small cash payments to stockholders. But others focus more on the stock price increasing. There is no right or wrong answer. Only time will tell if it was the right choice.

4. Enter Your Stock Trade

Once you pick a company, find the ticker symbol and stock price to figure out how much you are going to buy. Let's say you want to buy stock in JPMorgan Chase because you think it will go up in price over the next year. A quick search at your brokerage should lead you to the ticker symbol (JPM) and current stock price ($88.05 as of this writing).

Preparing for a stock trade in my account at Ally Invest

Assuming you have a budget of $500 for your first stock, you can divide your budget by the stock price to find the number of shares you can afford. In this example, you can afford 5.7 shares. Some brokers allow you to buy fractional shares, but most make you buy whole shares.

At $88.05 per share, five shares would cost $449.25. You would enter the ticker symbol and number of shares, click the button to submit your trade, and the brokerage takes care of the rest.

Most brokerage firms handle everything electronically, and trades execute nearly instantly during trading hours. You'll get a confirmation from your brokerage that the trade has completed and the final price you paid per share. And you won't be charged a penny in commissions.

Buy Stocks Online: It All Starts With Your First Stocks

When I made my first stock trades, it cost about $7 to buy and another $7 to sell. That means I would have to make a $14 profit on my investment just to cover trade fees. For small purchases, that's a big cost.

My first two stocks were Walmart and General Electric. I purchased $250 of each in my first year working after college. I don't have those two stocks anymore, but I have a much larger portfolio that grew bit by bit over time. You can do the same, and it all starts with your first stock. Thanks to the recent elimination of trading fees, investing in stocks and ETFs is easier than ever.

Eric Rosenberg

Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full time. He has in-depth experience writing about banking, credit cards, investing and other financial topics and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers and spending time with his wife and little girls.

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