A complete guide to buying shares in the world’s best companies. Discover the different methods of buying shares and our lists of regulated stock brokers. All this at your disposal so that you only have to study the best stocks to buy.
Anyone wishing to buy shares (or sell shares if they already own some) will need an intermediary to carry out this operation on their behalf. This is the well-known figure of the stock broker. These, whether physical or online, execute the orders to buy or sell shares that they receive from their clients in exchange, of course, for a commission.
Online stock brokers
Online stock brokers are financial companies that operate strictly on the internet and offer their mediation services between their clients, the traders, and the markets. Depending on the broker you use, you can trade company shares in different ways: spot shares and CFDs on shares.
Knowing the differences between these two investment methods is extremely important. Below you will find all the information you need to choose the type of broker (online or traditional) that best suits your needs.
An online stock broker is nothing more than an online trading company that offers its clients the possibility of buying shares in the traditional way, as if it were a bank broker. What is the advantage of these brokers over bank brokers? The main one is that in addition to acting as a broker to buy shares, it will also offer you the possibility to perform other types of operations, such as investing in Forex, if you wish.
Another advantage of an online spot stock broker is that they often offer low commissions compared to traditional brokers. Finally, the process of registering, depositing or withdrawing funds is usually quicker. If you want to get into the world of online stock trading, here are our lists of the best brokers to buy stocks online.
Best spot stock brokers
- Cost: this is usually lower than with a bank or traditional broker. However, you should still read the terms and conditions carefully to ensure that the stock broker you choose is cheap.
- No CFD trading: As with traditional brokers, you will not be able to make use of CFDs. Only if your share packages go up will you be able to make a profit. You will not be able to use leverage either.
- Account: The account opening process is usually faster than with a traditional broker.
Stock CFD brokers
The rise of online CFD brokers has popularised this form of investment to an extent unimaginable a few decades ago. Today, many individual investors choose to invest in shares online using contracts for difference. The main difference between buying and selling shares and CFD trading is that with CFD trading, the investor owns the shares in which he or she invests. This means that the profit is only generated if the value of the shares rises.
CFDs, on the other hand, are contracts between two parties, which exchange the difference between the entry or purchase price and the exit or sale price of each of the shares (or other financial instrument) included in the transaction. The main attractions of CFDs are leverage (which allows trading with more money than is invested) and short positions (whereby profits can be generated when the price of an instrument is falling).
CFDs are complex instruments that carry a risk of capital loss and should only be traded if you are confident that you have the necessary knowledge. Leverage can generate profits but can also cause you to lose money quickly. If you are new to the subject then we recommend that you buy stocks in cash and leave CFDs on the back burner,
Best stock CFD brokers
- Cost: similar to trading with online brokers for cash equities. Some do not charge commission apart from the spread.
- CFD trading: they do allow CFD trading on shares, ergo, there are options to play with market falls. In addition, you can trade with leverage and also in bear markets.
- More risks: All the advantages mentioned in the previous point are also risks. With leverage you can make money but you can also lose money. The best advice is to exercise caution and, if you are new to trading, start by opening a demo trading account.
Traditional stock brokers
I’m sure that reading this title conjures up images of films in which shares are traded over the phone from offices full of screaming stockbrokers. Such an image of the typical stockbroker is a far cry from reality today.
For private customers wishing to buy company shares, the most common option is to go to their usual bank, as they usually offer brokerage services. Even so, the buying and selling process is similar. The client, after opening a securities account, will send his orders to his bank and the bank will execute them on his behalf. Simple.
If you decide to use a bank broker, we recommend that you read the terms and conditions and pay special attention to the fees (maintenance and custody) as they are often very high and, especially when investing in shares with little capital, this can reduce the potential profits from your stock trading activity.
A list of bank brokers that are available to clients residing in Spain can be found here:
- Banco Sabadell
- Banco Santander
Remember that in order to use any of them you will have to open a bank account with the bank.
- Cost: the traditional ones are usually linked to large entities, whether banks or companies related to the stock market, so they are usually more expensive than the online ones. They usually charge a commission on both the sale and the purchase, which can mean that, although the share has risen in value, the increase in value is less than this payment and, therefore, no money is earned.
- No CFD trading: With traditional brokers, you only have the option to trade on rising stock markets. In other words, you cannot trade on market declines, as you can with CFDs (Contracts for Difference). You will only generate profits if your share packages rise.
- Bank account: to trade with a bank broker you need to open an account with the bank and this process often takes a few days.
- Lower risk: ideal for those who want to invest in the stock market without taking on the risks inherent in leveraged or short positions.
Are you thinking of starting to trade stocks? If so, there are a few things you should know before you start putting your money on the line in the stock markets. This is not Hollywood, nor are you the “Wolf of Wall Street”. This is real and you can make money, but you can also lose money. So take your time, study, research, compare and decide. Take your time. Don’t rush.
As with other forms of investment, buying shares carries a risk of capital loss and this risk may be higher depending on the method of purchase or investment you choose. Remember that when investing, you should only risk as much capital as you can afford to lose. We therefore recommend that you read this guide carefully and choose a stockbroker that offers everything you need.
As mentioned above, there are two main ways to buy shares: through traditional brokers or through online brokers. There are several (and not unimportant) differences between the two. Within online brokers for buying shares, there are also two types. For example, some brokers are spot stock brokers while others offer CFDs on company shares. Let us now focus on CFDS.
Let’s say your prediction is that Amazon shares are about to fall and so you decide to use a CFD to open a short position whereby the fall in the value of Amazon shares will generate profits in your stock trading account. The first thing you will need to do is open an account with a stock broker and then make a deposit to start trading. Please note that there is an identity verification process that online brokers will have to follow before your funds become available on your balance sheet.
The leverage margins for each CFD can vary greatly depending on the financial instruments we want to trade, the stock broker we choose and even the package of shares we sign the contract for difference on. For example, if the margin is 10:1 for every euro deposited you will be able to trade 10 euros in packages of shares. This leverage is extremely attractive to many traders and that is why contracts for difference have become so popular.
Although leverage has obvious advantages, at OKBrokers we like to emphasise the fact that it also entails the assumption of risk. If the price of the stock we are trading moves against our prediction, it is easy to lose the total money invested. To avoid generating more losses than we have deposited, choose stock brokers that offer negative balance protection and always use the stop loss.
To calculate the cost of your trade you need to take into account the spread and any other commissions charged by your chosen online broker although generally stock CFD brokers do not abuse commissions or transaction costs.
Advantages of CFDs on stocks
- CFD trading in equities allows for low initial investments
- If we use leverage, we will be able to multiply our profit.
- It is possible to trade in different markets from the same platform almost instantaneously.
- Access to graphics tools and other software
Disadvantages of equity CFDs
- Trading leveraged products entails risks
- You should only trade with brokers regulated by some of the major financial regulatory bodies.
- Buying and selling commissions are paid
- Profit possibilities depend on the high volatility of the market.
- You have to operate with caution in order not to lose your investment.
- CFDs are complex financial instruments as you can see from our repeated risk warnings.
- Choose your broker: take a look at our lists of stock brokers regulated by a financial conduct authority or choose another broker that suits your needs. Make sure the broker offers the shares of the companies you are interested in.
- Open your trading account: follow the steps provided by the broker to open your account. Of course, you will have to provide personal details such as name, ID, etc.
- Deposit your funds: Once you have opened your account, you will need to deposit the start-up capital you wish to trade with. Some payment methods such as bank transfer may take time but others are instantaneous.
- Buy the stocks you want: at this point we assume you have already studied the markets carefully so choose the companies you want, select how much you want to invest and send your orders.
- Use stop loss: make use of this handy tool that you can use to minimise the risk of your stock portfolio.
This is a fundamental aspect to take into account before even making our first operation and will depend on a multitude of variables such as our capital, our investment strategy and others. As a general rule, it is recommended to have a diversified portfolio of shares. Remember the saying that you should not put all your eggs in one basket? This also applies to investing. Reduce risks by dividing your capital between the different companies you have in mind.
It is advisable to list the companies we are interested in along with their share prices. With a simple calculation we can find out how much we can afford to buy of each of them. Finally, we can mention another piece of advice that is often heard: buy shares in companies from different sectors. Sometimes a change in regulation can affect a whole sector and if we are too exposed our portfolio could be badly affected.
Types of stock market orders
In the stock market, when an investor wants to buy or sell shares (or any other type of financial instrument), he has to issue an order for his broker (traditional or online) to execute the transaction. Stock market orders can be of various types and here we list the main ones:
- Market order: these are executed at the current market price at that time.
- Limit order: in this type of order there is a limit price for either buying or selling shares.
- Stop orders: these orders are issued only when the price of the instrument reaches a pre-determined price.
- Stop-limit order: similar to the previous one, in this type of order two prices are identified: the limit price and the stop price.
- Best Bid: executes at the best price available at the time the order is placed. In the event that the offer of shares does not satisfy the total of the order, the order is executed partially.
Attributes of exchange orders
Irrespective of the type of order concerned, an exchange order may have a number of other attributes.
- Immediate order: an immediate order will be executed on the spot and, if not possible, it will be automatically cancelled.
- Expiration date: an order valid for a specific period of time. With this we can make our order, for example, valid until the market closes.
- All-or-nothing order: if the offer does not satisfy the entire order, the order will not be executed.
It is important to make use of the types of orders to buy and sell shares as well as the different attributes to trade safely.
There is no one answer to this question and probably every experienced investor has his or her own formula for finding the best stocks to buy. It really depends on our investor profile and, to a greater or lesser extent, on our knowledge of the market. Someone looking for short term returns will look for companies that are little known but have growth potential. A cautious investor may prefer lower returns but with reduced risks and opt for established companies with a long history of financial success.
In the first group we could include the shares of some companies in the technology sector. Who wouldn’t like to find the new Google? It is a pity that predicting future results is impossible. In the second set of companies we will have banks, oil companies, communications companies or similar. It all really depends on the risk you are willing to take and the goals you have set for yourself. If there is virtue in the middle ground, it may be that combining these two types of investment is a reasonable decision.
On our website you can find information on how to invest in shares in a multitude of companies such as:
- Buy Amazon shares
- Buy AstraZeneca shares
- Buy Banco Santander shares
- Buy Google shares
- Buy Inditex shares
- Buy shares in Moderna
- Buy Pfizer shares
- ABN AMRO Investing Review
- Accenture Stock
- Activision Stock
- Adidas Stock
- Adobe Stock
- Ahold Stock
- Air France Stock
- Air Liquide Stock
- Airbnb Stock
- Airbus Stock
- AkzoNobel Stock
- Alcatel Stock
- Alibaba Stock
- Allianz Stock
- Alphabet Stock
- Alstom Stock
- Amazon Stock
- Amazon Stock
- AMD Stock
- Apple Stock
- Arcadis Stock
- Arcelor Mittal Stock
- ASML Stock
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- Audi Stock
- Aurora Cannabis Stock
- Axa Stock