Once you’ve opened and funded a brokerage account and then identified stocks you’d like to buy, it’s time to execute trades in your account. Before you put in an order to buy stock, you need to understand a few details about the process—purchasing stock isn’t as simple as just pressing a buy button on an app. You’ll generally have to pick an order type, which provides instructions on how you want to purchase a stock.
Two of the most common order types you’ll have to choose from:
- Market order. This type of order instructs the broker to buy stock immediately at the lowest price available. The current stock price you see when you enter a market order isn’t necessarily the price at which your market order will be executed—prices change in milliseconds, and you’re only telling the broker to get the lowest price available.
- Limit order. You name your price, and the buy only gets executed if the stock falls to that price or lower within a selected time period. If the stock never reaches the specified price before the limit order expires, your trade gets canceled.
If you have a small balance in your account but the share prices of stocks you’re looking to buy are very high, consider fractional shares. Take Google parent, Alphabet, Inc.: As of late September 2020, Alphabet is priced at nearly $1,500 a share. With fractional shares, you could invest as little as a few dollars in the stock. A growing number of brokers—including Charles Schwab, Fidelity and Robinhood, to name a few—sell fractional shares.