How to Buy Stocks Without a Broker

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You don’t need a stock broker in order to buy stocks and set up your portfolio for retirement and other goals. Learning how to buy stocks without a broker is actually very easy—in theory. Learning how to successfully invest and earn money isn’t easy, but the act of buying stocks without a broker is simple.

Choose an Online Brokerage Account and Firm
The first thing you must do when learning how to buy stocks without a broker is to decide what kind of account to open and buy stocks in. There are two choices facing you:

  • You can choose a qualified account, which means a tax-qualified account like an IRA that restricts your access to the money you invest but offers certain tax advantages either now or after retirement when you start taking distributions.
  • Or you can choose a non-qualified account, which is also referred to as a brokerage account, that does not shelter your positions from taxes when you have a gain that is realized in cash. It is important to remember that the gain in the value of a stock is not taxed unless you sell the stock, which is considered “realizing” the gain. Dividends and interest may also carry a taxable consequence in a non-qualified account.

Once you have decided which type of account you want, you need to choose a brokerage firm that will allow you to make trades on your own without a broker. Many online companies allow you to buy stocks on your own. Before you choose one, make sure you compare rates and commissions to get the most advantageous deal. In addition, make sure they allow trades to be made by whatever method you prefer—phone or internet trading platforms. It’s also a good idea to choose one that has a system that gives clients access to real-time quotes so that you can make informed decisions about your trades.

Study Positions and Risk Factors
The next step in learning how to buy stocks without a broker is to study the potential stocks you may want to buy. You can look at the stocks of companies that you know and trust, and maybe even those whose products you use every day. For many people, this proves to be the best method because you know their products as well as the company’s potential through your own first-hand daily use. But ultimately you want to choose a company with a stock that you think will grow in value over time. Some stocks pay dividends. These stocks might grow slower over time, but the dividends that are paid to you are still a form of growth or profit.

Before you buy a stock, make sure you understand what risks you face in buying into that company, or investing in that industry or sector. Because buying stocks without a broker isn’t just about making money, it is also about understanding what company, industry and economic factors could cause you to lose money while you own a certain position.

Define Your Sell Parameters
Many investors favor a buy and hold strategy for their portfolios. That means they buy stocks and hold them for years or decades without selling them, believing this will give them the greatest chance of growth, as is evidenced by historical performance. While you may be planning to buy and hold the stocks you invest in, you still need to set parameters that would cause you to sell early because when you learn how to buy stocks without a broker, you must also learn how to decide when it is the best time to sell since a broker will not be giving you this instruction or advice. You can set your sale parameters on a certain price point, deciding that you will sell when stock ABC reaches $X. You can also try to anticipate the movement of the market based on news and economic events and decide to sell when those seem imminent to impact your positions. The important part is to make sure you sell before the stock hits bottom and, ideally, before it falls below your purchase rice.

Learning how to buy stocks without a broker can be a real money saver for the average investor. But successful trading without the advice of a broker does not always come easily. For what you may save in commissions and fees, you may need to make up for with time spent studying your potential positions and the various factors that can control their price. But if you are willing to put in the time, you can succeed and build a portfolio worth retiring on.

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