How to buy a stock and set up an ETF plan step by step

How do you get started with investing?

We continue our financial journey with a beginner friendly guide for buying stocks and setting up an ETF investment plan. The exact steps may vary depending on which broker service you use, but the general process should be the same.

DISCLAIMER: I’m not a financial advisor, I’m just sharing what I learned and read.

Choose a broker

First you need to choose a broker. Your broker is the service through which you will buy and sell stocks. There are many different brokers and you should do research which one fits your needs best. App based brokers are very popular right now. I’m personally using the Germany-based Trade Republic. If you’re located in the US, I think Robinhood is similar to that.

Why did I choose Trade Republic?

I was looking for something easy and low cost, yet reliable. An online broker is the most convenient way for me and I like to stay flexible. You can set up everything from home or anywhere without endless paperwork and waiting periods. The whole registration process was very easy. You can just download the app and get started. Of course they’ll also verify your identity through a video call and checking your identity card.

I can do everything through the app and have a complete overview of all the documents. Another perk is the low cost. The app itself is completely free. For each buy and sell action you only have to pay 1€ and that’s it. Setting up an ETF investment plan or changing it is even completely free. From my own comparisons with other brokers this was just the best option for me and so far I’m very pleased with the service.

Set up your depot

Next, you need to have a depot, this is the account you will invest from. Trade Republic will give you a depot with Solaris Bank. You have to transfer money from your own account into your depot before you can start trading. Once the money got there you can see your disposable money in your app.

Start investing

Now you can get started. Select the stocks you want to buy. This will probably take the longest because you need to do some research on stock options. You can check reports and the company’s annual report, reviews by experts and so on. I’m not going to recommend any stocks as I’m not that knowledgeable about stocks, but make sure you’re comfortable with the stock you want to invest in and that it has a good long term perspective, if you aim at long term investing.

While you’re selecting your stocks, keep in mind to diversify here as well! You can do so by keeping a balanced portfolio and a good variety of different industries within your portfolio. Know your risk tolerance and stick to it.

How many share do you want to buy?

Once you selected your stocks, you need to decide on how many shares you want to buy. If you plan to get multiple shares within a short period of time on Trade Republic, try to buy them within a single order to save some money. You only have to pay 1€ with your order, even if you by several shares! In general I’d stick to a small number of shares in the beginning, after all you just want to get a feeling for everything first.

Market order, limit order, stop-limit order?

There are different kind of orders and you don’t need to be familiar with all of them. With a market order, you can buy or sell the stock just at the current market price – so basically you want to buy or sell it right now. This kind of order is fine if you want to buy and hold your stock, small changes don’t matter much and you just want to get the trade right.
With a limit order you can set a specific limit for your order to get more control. This is a good option of the stock experiences wider spreads within a short time. But you also might not get your oder in at all, if your limit is exceeded. The stop-limit order allows you to put a stop price on your order. Once it’s reached the trade will become a limit order.

Congratulations, you own a stock share!

Once you completed your order and the trade is made, you own a stock share, or multiple depending on your order. Now you can watch your investment develop over time and you will receive dividends according to your shares throughout the year. Check when the company is holding its general meeting, dividends are generally paid out shortly after that. Make sure you reinvest those, too!

Bonus: Set up an ETF savings plan

Select the ETF you want to invest in, choose the interval of investments and the amount you want to invest. Set it up and make sure you have enough money in your depot account to invest on the selected dates.
If you set up automatic withdrawals, you don’t have to put much work into it and the ETF savings plan will just work on its own.

Keep working on your portfolio

Reevaluate your investment portfolio regularly and see how your finances develop. Keep educating yourself about finances and the market.

What about taxes?

The taxes will depend on the country, so I can’t tell you what the laws are. But you should check any tax free amounts and make sure you make the best out of it.

What’s next?

Next week I’ll introduce my favorite finance books to you. They helped me get started and taught me so much. I hope you’ll benefit from them as well!

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