How to Actually Invest: Step by Step

In my last article, a lot was made of the importance of actually investing the money that you save, and rightly so. If you want to achieve that goal of accumulating $100,000 by 25, or in any three year period, you are going to need significant help from the markets unless you have a high income that allows you save a ton on your own (in which case, good for you! but you should still look into investing). However, over the course of the last week, many readers have thanked me personally for the advice, but have also noted that while they would love to invest, they really weren’t sure where to begin. Most were not necessarily concerned with which stocks to buy, although that did come up, but rather where they should go to buy shares. After all, it’s not like you can just walk into a grocery store, grab your shares and check out. I found myself a little embarrassed for assuming that everyone would just know where to go to invest, so as promised, I’m delivering an easy, step-by-step guide to help folks get started.

How Do I get Started?

Often, one of the most difficult parts of any journey is getting started. If you’ve been keeping up with the blog to date, you’ve likely built a budget that you’re determined to stick to, and may have already even started to see your savings balance increase significantly (nice!). If you’re not there yet, this will be helpful to you in a few weeks, so keep reading. For those that have saved up solid amount, it’s time to put those dollars to work.

Getting started is actually a simple task. In order to make investments or “trades” you will need to register with a broker, which is just a fancy word for middle-man. Let’s say you want to invest in Apple, and you place a trade to buy 10 shares at $170 each. Your broker will look for a market participant that is willing to sell you her shares at your specified price. Once this person is identified, the broker will deliver your newly acquired shares to your account in exchange for the $1,700 that you have pledged to the counter-party. Fortunately, the internet has dramatically increased the efficiency of this process over time, allowing for much cheaper and faster transactions.

The internet houses a plethora of brokers and choosing the right one can be challenging. Many brokers are associated with well known financial institutions, while others remain independent. In either case, you’ve likely seen ads for the major players on TV, social media, or in the newspaper – for those that still read it. You can take a look at some of the most popular options, below:

While many often opt for the platform that charges the lowest fees, I would caution against doing this as you may be missing out on some great advantages offered by other services. When choosing a broker, consider all of the aspects of the platform, not just the price. I won’t get into the advantages/disadvantages of each in this article, but check out this comparison by our friends over at Nerd Wallet which focuses on some of the more traditional brokers. You can also read about the benefit of broker apps like Robin Hood and Stash in this article by Magnify Money. Typically, I tell friends to use the platform that is offered by your main bank to take advantage of the various perks they offer, but for this article, we’ll discuss getting started via Robin Hood. It’s a convenient, well designed app with an intuitive interface, that just about anyone can use. Best of all, it’s FREE!

Step 1: Sign Up

The first step is navigating to the website to get started. Once our account is set up we’ll download the app to our phones and tablets and we’ll be able to invest anywhere we can get a signal.

Start by going to robinhood.com, and clicking on the “sign-up” button on the top right of the page, then follow the steps to open your account.

Step 2: Place Order

Placing an order is a breeze with Robin Hood. From the home screen, click on the search icon in the top right corner of the screen. My screen still says “bank account pending” as it takes time to verify.

Next, type in the name of the company, or its “ticker” then tap on the company once it appears on your screen.

This will take you to the screen shown below. From here you can view the stock’s performance over time, and start the purchasing process. You won’t actually purchase anything by pressing the “buy” button on this screen, rather you’ll be taken to the next step in the process.

On the following screen, you simply input the number of shares that you would like to purchase and select your order type. This option is shown in the top right corner of your screen and defaults to “market” buy. More often than not, a simple “market” order will do just fine. However, because trading happens in real-time, and stock prices don’t pause for us to place orders, a best practice is to use a “limit” order. This will protect you from unfavorable price swings that may occur during the time it takes you to complete your order. For instance, let’s say Facebook is trading at $180.21 as shown above and you decide to buy it. Let’s also suppose that after you click “buy” and while you are filling out your order, the stock price jumps to $185.00. If you use a market order, you will purchase the shares at the prevailing market rate, or $185.00 in this case. However, if you use a limit order with a limit of say $180.50, you would not have purchased the shares because the price is above your limit, saving you from purchasing at a price that may be too high.

In our hypothetical case, I have used a limit of $180.21 – see below.

Typically, you’ll only want to keep these orders in place for one day at a time, so select “4:00 pm today” (the time that the equity or stock markets close). This will allow you to purchase the shares automatically if the price falls to or below your limit. No need to worry about auto purchasing too many shares, as the app will only purchase up to the ten shares we indicated earlier in the process.

Finally, you’ll click continue, review the order and confirm it. Congrats! If you’ve followed these steps correctly, you are now a proud new owner of whichever stock you were looking to purchase.

Keep in mind that while we used the Robin Hood app for this demo, the steps are essentially the same for any platform. You’ll want to set up and fund a “self-directed” or “self-guided” non-retirement investment account, search the name of your target company, or look it up via its ticker symbol, set a limit price (a few cents above the current market price is usually a good idea), then review and confirm your order!

Having trouble with another platform? Leave a comment below and we can help you navigate your broker’s.