How to Buy Stocks: A 4-Step Guide to Start Investing
How to buy stocks is essential knowledge for millennials, members of Gen Z and anyone else who wants to build wealth for the long term.
Back in the late 20th century and early in the 21st century, how to buy stocks seemed like specialized knowledge for particular people. The "investor class," they called it.
A generation later, it's a fast-growing skill set, and barriers to entry for new market participants are getting lower and lower. The best online brokers and trading platforms are straightforward and readily accessible.
Indeed, digital access coupled with macroeconomic challenges make how to buy stocks not just easy but essential information for millennials and members of Gen Z who want to build wealth for the long term.
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And they're doing it. According to data compiled by the JPMorgan Chase Institute, the share of 25-to-39-year-olds adding to their investment accounts more than tripled between 2013 and 2023 to 14.4%.
The share of 26-year-olds who added to investment accounts since turning 22 rose to 40% as of May 2025 from 8% in 2015. And that doesn't include 401(k) investing.
"We've seen really strong, surprisingly strong growth in retail investing in recent years among people who may otherwise be first-time home buyers," JPMorgan Chase Research Director George Eckerd told The Wall Street Journal in mid-February.
According to Eckerd, the rise in millennial and Gen Z stock investors and the decline in home-buyers among these groups tilts the balance of wealth accumulation toward financial markets for them.
Meanwhile, the advent of fractional investing and exchange-traded funds (ETFs) has made it easier than ever to buy stocks.
Based on the rule of compounding, "time in the market" as opposed to timing the market has the most significant influence on long-term returns.
So, if you haven't already opened your own investment account, the earlier you start, the more likely you are to reach your long-term goals.
No matter your situation, here are four critical steps to take when learning how to buy stocks.
How to buy stocks: Determine your investment plan
It's great to think about finding "tenbaggers" (stocks that gain 10 times your initial investment) for your portfolio. But let's walk before we run and give some consideration to your personal big picture.
It helps to first identify your long-term goals for your investment account, the dollars required to achieve those goals and the risk you're willing to take in pursuit of them.
There are many ways to set investment goals. However, dividing them into short-, medium- and long-term periods is the simplest.
Short-term goals could be anything you'd like to achieve within the next year; medium-term goals could be those to achieve over the next five years; and long-term goals are those farther down the road, say retirement, at age 60, 65 or whatever suits you.
Everyone's plan will be different. We'll focus on the long-term goals of a 25-year-old looking to retire at 65, providing approximately 40 years of earned income.
According to a July 2025 Charles Schwab survey of 1,000 people with 401(k) plans, the respondents said they would need $1.6 million (pdf) to retire.
Based on 40 years to get to this figure and an average annual return of 10.3% (dividends reinvested) for the S&P 500 for the 30 years through 2025, you would need approximately $31,700 today.
A new grad is unlikely to have this initial amount. However, if you invested $1,000 today and made annual contributions of $3,000 in the next 40 years, time and compounding would allow you to get to your $1.6 million goal.
With your goals in hand, you're nearly ready to buy stocks.
How to buy stocks: Find a broker
To buy stocks, you need to open a stock market account and place an order through a stockbroker.
These institutions are regulated by FINRA, the Financial Industry Regulatory Authority, a government-authorized not-for-profit organization whose sole role is to ensure that the broker-dealer industry operates fairly and honestly.
There are generally two types of stockbrokers: Full-service investment advisers and discount/online brokers.
Full-service investment advisers are professionally licensed to provide investment advice on behalf of the stock brokerage they work for.
They either charge a percentage of the assets they manage or commissions for trades made to buy or sell stocks and other investment products.
The latter uses online technology to buy and sell stocks and other products on your behalf. They generally provide these trading services at low or even zero-fee commissions.
How to buy stocks: Select and research stocks to buy
For many investors, ETFs provide a low-cost and easy way to invest in stocks across themes, regions, company sizes, investment styles, etc.
At the same time, one of the best ways to find stocks to buy is to look through the holdings of ETFs.
For example, if you believe free cash flow generation is an essential attribute for stocks in your portfolio, you'll want to check out the Pacer US Cash Cows 100 ETF (COWZ).
This ETF screens the Russell 1000 index for companies with the biggest free cash flow yields. Names in the top 10 currently include gold miner Newmont (NEM), biopharma outfit Gilead Sciences (GILD) and energy supermajor Exxon Mobil (XOM).
With approximately 5,700 stocks to buy listed on the New York Stock Exchange and the Nasdaq, it's critical to do your research and choose stocks that align with your investing goals.
How to buy stocks: Place the order
By now, you've done all the work and preparation necessary to own stocks. It's time to buy some.
There are three order types: market; limit; and stop. Each of these orders is used in a specific situation.
Investors use a market order to ensure they buy a particular stock at a specific time without regard to price.
The downside is that you might pay more than you expected in a fast-moving bull market or, if you're selling, get far less than expected in a fast-moving bear market.
A limit order restricts the price you're willing to pay on a buy and the price you're ready to accept on a sale. For example, if you put in a limit order to buy Stock A for $30, it could be filled at $29.95, but not $30.05.
The inverse is true for selling a stock. You put in a limit order to sell Stock B for $30; it could be filled at $30.05, but not $29.95. Investors use limit trades to ensure price certainty for buy or sell transactions.
A stop order is used to buy or sell a stock at the market price once it hits your specified price.
In the above example, if Stock B is trading at $30, and you place a stop order to buy at $32, once it hits $32, a market order is placed to buy.
Conversely, if you place a stop order to sell at $28, and it's trading at $30, a market order is placed as soon as it falls to $28. Investors use stop orders to ensure the price doesn't get away from them on the upside or downside.
With these definitions in mind, you're ready to start investing in the stock market.
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