Buying Stocks without a Broker: A How-To Guide

Stockbrokers are a great resource for traders who are just starting out, but they’re really not a necessity. The advancement of technology has made it easier than ever to trade on the stock market without a brokerage account. Keep reading to learn more about the benefits of broker-free trading, how to set up a trading account, and the best strategies for finding good stocks on your own.

Why You Don’t Need a Stockbroker

It may sound intimidating, but it is totally possible to start buying stocks yourself. In fact, with online brokers and trading accounts, you have direct access to the markets. Some of the benefits of going broker-free include:

  • You can lower your transaction costs by skipping the broker’s commission.
  • You are more aware of developments in the market and with your stocks, allowing you to take part in more responsive trading.
  • You are able to learn more about the market and develop your investment skills.

How To Set Up a Trading Account

Image via Flickr by SimpleFX

You can set up your online trading account by following these simple steps:

  1. Compare online brokers. Different costs are associated with each site and the different types of trades. Spend some time reviewing each broker’s policies so that you can make an informed decision.
  2. Choose an online trading firm that meets your needs. Online brokers have different requirements for the minimum balance you can have. Check these details as well as any hidden fees to find an account that works for you.
  3. Complete the firm’s application. Once you decide on a firm, go to their website to fill out their application and open your account.
  4. Decide how you want to fund the account. You can either send in a check or fill out your account and banking information directly online.
  5. Review the application and submit. Make sure that the information is correct and that you read and understood the types of trading and accounts you’re authorized to use.

Where Are the Good Stocks?

In order to effectively find promising stocks, you should:

  1. Familiarize yourself with how your stock screener works. Most online stockbrokers have stock screeners that allow you to filter stocks based on a number of characteristics. This tool can be very helpful, so take some time to make sure you understand how your screener works.
  2. Look for growing companies. Assess the past and future earnings growth rate to decide whether the stock will likely yield a high return.
  3. Evaluate the stock’s value. You can check what is known as the price-earnings ratio, also referred to as the P/E ratio, to assess whether a stock is reasonably priced for the value it offers. You can add criteria in your screener to check this for you, but it’s calculated by dividing the current share price by an individual share’s annual earnings.
  4. Research the company. The screener is a great way to narrow down your choices, but before you invest, you should look into the company’s management, industry, and balance sheet.

Trading without a stockbroker is definitely possible, and it can even offer some valuable benefits. Before you decide to dip your toe in broker-free trading, spend some time evaluating your needs and whether you can invest the time in this new endeavor.

Leave a Reply