Here’s How to Buy Stocks Online Without a Broker

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You may have a lot of questions if you are interested in investing in the stock market for the first time. One question that beginning investors often ask is whether they need a broker to begin trading. As you’ll see, the answer to this question largely depends on what exactly you mean by the word “broker.”

How to Buy Stocks Online Without a Broker

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When you’re first getting started, terms like “broker” can be a bit confusing. If you think of a broker as a physical person who will actually buy and sell stocks on your behalf, then the rest assured there’s no need for one. Commission-free brokerage firms like TD Ameritrade or Charles Schwab now allow you to sign up for a free account online and complete as many trades as you like, all without the help of another person.

If you are looking to bypass signing up for a brokerage account altogether, it’s also possible to purchase stocks directly from a company or through a third-party agency.

What Are Stocks?

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Stocks are small pieces of ownership in a company. By purchasing a share or multiple shares in the company, you are entitled to a fraction of the company’s profits and assets. You’re also entitled to certain shareholder rights such as voting rights.

How Do Stocks Work?

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The beauty of stock prices is that they fluctuate in value. Say that you buy one share of Company ABC for $100. If the company does well, the demand for its shares will rise, causing its share value to increase.

For example, if you held onto the share of Company ABC for 20 years, the share you bought for $100 might be worth $1,000 if the company does well. Keep in mind, however, that the opposite is also true. If the company does poorly, the share you bought for $100 could end up being worth only $10 or even $1.

Can You Buy Stocks Without a Broker?

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Direct Stock Purchase Plans or DSPP do make it possible to buy stocks directly from a company or through a third-party brokerage. It’s worth noting, however, that this option was the most popular in the days when brokerages charged higher investing fees than the average DSPP.

Since the recent rise of commission-free brokerage accounts, however, a DSPP is now actually the more expensive option. So while it is still possible to purchase stocks directly online, it’s often cheaper and easier to do so by setting up a free online brokerage account.

Where Can You Buy Stocks Online?

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If you do choose to go the DSPP route, one of the best online resources is Computershare. This third-party agent allows you to set up an account and purchase stocks directly from companies that still offer direct stock purchase plans. A few of the top available companies include Wal-Mart, Amazon, IBM, AT&T, and more. If the company you’re interested in is not listed, it’s best to contact them directly and ask whether they offer a DSPP.

If you chose to invest through a commission-free broker, you’ll simply set up a free account and fund it with money from your checking account. Some of the best free online brokers include:

  • Charles Schwab
  • TD Ameritrade
  • WeBull
  • SoFi
  • E*Trade

Basic Steps to Buying a Stock Online

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If you set up a DSPP, you’ll be able to purchase shares or fractional shares through the account you set up when you first register. Whether you set up your account through Computershare or an individual DSPP service will depend on the company you invest in. Many direct stock purchase plans will also allow you to set up auto investing which will automatically pull and invest money from your bank account at regular intervals

If you sign up with a commission-free broker, investing in the company you’re interested in is as easy as locating it in the search tab. Simply type in the company’s name or ticker symbol and you’ll be able to pull it up on your screen. Select “trade” and enter the number of shares you want to buy and wait for your purchase to fill. Many commission-free online brokers now also offer automated investing features.

Be Responsible With Your Investments

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Because your shares will only increase in value if the company does well, it’s incredibly important to choose your investments wisely. Many commission-free brokers now have whole educational sections on their platforms dedicated to helping new investors learn the ropes.

If you plan to purchase stocks directly, then it’s definitely worth doing your own research through investing books or online courses. Never invest more money than you can afford to lose, as even the best companies can experience dips during a sudden bear market.  

Online Stock FAQs

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How much money do I need to buy a stock?

Not much! A common misconception is that it’s expensive to get into the stock market, but this couldn’t be further from the truth. While some DSPP agents do have minimum investment requirements, most commission-free online brokers do not. If you choose an online brokerage that offers fractional investing, you can buy partial shares in any company you chose, even if you can’t yet afford a whole share.

How will I know when to sell my stocks?

This is a question every investor must ultimately answer for themselves. It largely depends on your unique trading style, but in general selling for a 20- 25% profit is a good rule of thumb. Additionally, you should choose an acceptable loss percentage before you invest in case things don’t pan out.

For instance, if the stock goes down in value 7% -8% below what you paid for it, it’s usually time to cut your losses. You can always buy back in later if things turn around, but there’s no need to ride a losing stock all the way down. If you’re not sure whether or not to sell, then consider setting a trailing stop loss. A trailing stop loss will automatically trigger the sale of a stock if it drops from its highest price by whatever percentage you specify.

Are stocks and shares the same thing?

For the most part, yes. When someone says they own “stock” in a company, they mean they own either a share or a collection of shares.