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How to Buy Stocks on The U.S. Stock Exchange


One of the best ways to invest your money is to buy and sell stocks on the stock market. It might seem intimidating at first, but buying stocks isn’t as complicated as it sounds. To start things off, it’s important to learn stock terminology before making your first investment. Fortunately, buying your first shares online can be relatively quick and easy. 

Below you’ll find a step-by-step guide to buying stocks on the U.S. Stock Exchange.

What’s a Broker, and How Do I Choose The Right One?

To buy and sell stocks on the stock exchange, you have to use a broker. These are individuals or companies who mediate buying and selling assets on the stock exchange. They earn money by charging commissions to their clients for each transaction. 

Your personal needs will determine which online broker is best for you. Here are a few things to consider:

  • If you plan to just buy and hold stocks, you probably don't need a platform with extensive features.
  • If you're a new investor and want to invest a few hundred dollars at first, you'll probably want to look for a broker without minimum investment requirements.
  • Most online brokers these days don't charge commissions on stock market share purchases, but they still make money from transactions through what's known as a spread, which is a price difference between buying and selling an asset.

Here are some of the most popular online stock brokers. All of these companies offer commission-free stock trading and have no minimum amount to open an account:

How to Buy Stocks

Once you’ve selected a broker, you can begin the process of buying shares on the stock market and investing your money. Doing so is simple if you follow the steps below:

1. Open an account on the platform of your choice

    Opening an account with an online broker is as easy as setting up a bank account: you will need to fill out an application and provide identification to prove your identity. You will also likely be asked to provide other information such as your taxi-id number or SSN.

    2. Research the companies that you want to invest in

      Once you set up your account, it's time to start the stock selection process. Start by researching the companies you’re familiar with as a consumer. Most online brokerage platforms provide information about the performance of the stocks being bought and sold on them, such as historical price charts and expert opinions about future prospects.

      When you buy shares, you’re effectively buying a piece of that company. This means that the value performance of your shares over time will depend directly on the behavior of the company and the market in which it operates. For this reason, it’s important that you understand how that company makes money and whether its market may be threatened or may be helped by external factors. For example, at the onset of the COVID-19 pandemic, airline stock prices fell, while pharmaceutical industry stocks grew by leaps and bounds.

      3. Add funds to your account

        Once you decide which companies you want to invest in, you’ll need to add funds to your account in order to make a purchase. Different brokers have different policies for transferring funds, but most have the option of withdrawing funds directly from a debit account. For this, you can use your PODERcard.

        4. Place a purchase order

          Once your account has funds, you’ll need to place an order for your broker to purchase the shares you want. Because the value of shares fluctuates constantly, brokers offer different types of buy orders that will allow you to apply different strategies and find the best price for your new shares.

          Types of Purchase Orders

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          Remember, the broker doesn’t have shares in his possession to sell to you, his job is to find other users who have the shares you’re looking for and who have them for sale and mediate the transaction between you—these users are known as counterparts or counterparties. The purchase is often not immediate. There are different types of purchase orders that determine how broker will attempt to make the purchase. The following are the main types of orders and their characteristics:

          Market orders

          A price limit isn’t implemented with market orders. Instead, the shares are bought at the best price found on the market. When a market order is placed and there aren’t enough shares offered at the lowest price, the broker will go to the next best price available and so on until the number of shares requested is met. This type of order takes the least amount of time since the broker only has to look for the counterparties offering the best price at the moment. It’s also  not necessary to wait for an asset price movement.

          Limit orders

          These orders have a limit price that shares will be bought at. In this case, the broker will look for counterparties offering shares at or below the limit price and, if there aren’t enough shares to cover the demand, a pending limit order will be placed at the same price for the remaining shares. The broker will continue to look for counterparties offering at that price until the number of shares ordered is reached.

          Stop orders

          This type of order is rarely used when buying shares. Their main characteristic is that they are not executed until the market price of an asset reaches a predetermined level. For this reason, they are more commonly used for selling, where a minimum price limit is set and, if this lower limit is reached, the shares are sold to avoid further losses. A stop order behaves like a market order once the indicated price has been reached.

          When buying, stop orders can be useful for designing investment strategies in which a resistance price is speculated. For example, if a company's stock has fluctuated between $18 and $20 for a long time, you might infer that it will continue to increase in value on the day it reaches $21. This would be the resistance price. In this case, you can place a buy stop order at $21, and when that price is reached, the broker will automatically buy your shares. This ensures the purchase at the beginning of the anticipated upside.

          Stop-limit orders

          As the name implies, these are a combination of a stop and a limit order. The differenceis that they don’t act like a market order once the limit is reached. You must provide both prices (the stop and the limit) in order to place one.

          Taxes

          Any profits made through stock investments are subject to the applicable taxes. If you decide to pursue these types of investments and make money doing so, be sure to report them correctly on your next tax return. The two main types of taxes you will need to consider are:

          Capital gains tax

          A capital gains tax applies to the gains from selling your shares. If you have a loss when buying and selling shares, this should also be reported as it will decrease your taxable income for the year. The percentage you’ll have to pay depends on how long you have held the shares in your investment portfolio:

          • Short-term gains: Gains realized on the sale of assets held for one year or less are considered short-term. Gains are added to your regular annual income (such as your salary) and are taxed at the same rate as your other income.
          • Long-term gains: If you hold an asset for more than one year, the gains you have when you sell it are considered long-term. In this case, this income is taxed at a preferential rate of 0%, 15% or 20% depending on your total level of income during the year.

          Dividend tax

          When we buy shares in a company, we’re actually buying a small part of the company. As shareholders, we may be entitled to a share of the profits generated each year. This profit sharing is known as a dividend payment. 

          In general, the dividends we receive from our ownership interest in the business are taxable income that must be reported as part of our annual earnings, but there are certain exceptions. Dividends may be considered qualified or non-qualified depending on the industry in which the company operates, how long you held  the shares, and other factors. We recommend that you consult a certified public accountant if your shares generate dividends. 

          Tips Prior to Buying Shares

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          Buying shares can be an excellent way to grow your family’s wealth, but it also carries risks. Even experts can suffer large losses. Before making any purchase, pay attention to the following recommendations:

          • Only invest an amount that you can afford to lose. The stock market can be very volatile, and it’s impossible to predict its movements accurately. The price of your shares can fall sharply because of factors inherent to the company or because of external market factors. We recommend that you only invest a small proportion of your savings and keep in mind that just as you can generate very high profits, you can lose your entire investment. There are many methods and tips to set a limit for your investments in the stock market, but one of the most common and simple calculations used by experts is to allocate 10% of your savings to this activity.
          • Thoroughly research companies you want to invest in. Also known as due diligence, this process includes reviewing the company's accounting books from previous years, analyzing its stock’s historical behavior and prices,,and researching its potential strengths as well as its  internal and external threats.
          • Make sure your broker is regulation-compliant. The Financial Industry Regulatory Authority (FINRA) is the organization in charge of regulating and certifying brokers and financial advisors in the U.S. The BrokerCheck tool allows you to check the regulatory status of any broker in the country. All of the firms that we recommend in this article are FINRA-certified, but if you decide to use any other firm, we recommend that you check their details with this tool.

          Common Mistakes

          The world of stock market investing is complicated and often unpredictable, so making mistakes, especially in the beginning, is almost inevitable. But don't be discouraged! Here's a brief list of the most common mistakes new investors make to help you avoid making them with your first investments:

          • Failing to see the long-term picture. Many new investors get desperate when they see their assets start to lose value and sell just before a price rally. When you buy stocks, you should be clear about how much money you can afford to lose and how long you can wait to see returns. It’s common for long-term investments to have temporary losses, but if you really believe in the companies you invest in, it’s often necessary to wait for certain negative seasons to pass.
          • Overestimating your luck after a good run. On the other side of the coin, many people who have good luck in their first transactions decide to increase their investment amount and end up losing more than they planned. To avoid this, it’s very important to stick to your initial financial strategy and not fall into the temptation of increasing the limits you established from the beginning.
          • Getting carried away with disreputable "analysts". The Internet is a wonderful source of information for all kinds of investors thanks to the enormous diversity of points of view that can be found in blogs, YouTube videos, and specialized forums. However, this diversity of information also includes many self-styled "experts" who may spread false or unsubstantiated information. Never focus on a single person’s opinion. Always make your own decisions based on valid research and sources.
          • Putting all your eggs in one basket. Diversification of an investment portfolio is essential to mitigate risk. When you invest in a single company or industry, the risk of an unexpected event derailing your investment plan is greater. Having your investments diversified in different industries and companies will bring you peace of mind in case one of your investments drops abruptly.
          • Falling for the "sunk cost fallacy". The sunk cost fallacy is a logic flaw where we find it hard to admit defeat and try to recover losses by injecting more capital into a project that has clearly already failed. Just as it’s important to wait for certain down seasons to pass, it’s also extremely important to know when to cut our losses and stop them at the right time.

          Take the plunge and increase your wealth!

          The world of stock market investments is very broad and complex. Getting started buying shares on the stock exchange is relatively simple. If you’re looking for passive income that can multiply your family’s wealth, the sooner you start, the more experience you can accumulate over time. The first step to start investing in the stock market is to have a bank account, and PODERcard is a great option!

          Frequently Asked Questions

          How much money do I need to invest in the stock market?

          The minimum amount to open an account with a broker depends entirely on the company you choose. Some brokers have minimum investment amounts, while others allow you to open an account with just a few dollars. In addition, some firms, such as Robinhood, offer the ability to buy fractions of shares, so you can start with amounts as low as $5.

          What are the U.S. stock market hours?

          The New York Stock Exchange (NYSE) operates from 9:30 a.m. to 4:00 p.m. (Eastern Time) Monday through Friday. You can place, buy, and sell orders at any time. You just need to know that they will not be executed while outside of these trading hours.

          What is the best way to learn how to invest well?

          There are a myriad of online resources, including this article, that you can read to gain the basic knowledge and tools to start investing in the stock market. The best way to learn is by doing. Plus, you can practice your investing skills without risking a single dollar because most online brokers offer the possibility of opening a practice or demo account. With these accounts, you can use the platform with fake money and watch your performance in real time without risking your real money (although you won't be able to cash out your profits if you make them). The purpose of a demo account is to let clients to test the platform's services while improving their investment strategies.