How to Buy Shares in a Company 2024

Have you been wondering how you can get the shares of the companies of your favorite products? Do you want to put some money away for some time while it grows? If this is you, you must learn about shares. In this article, we’ll talk about how to buy shares in a company and the different types of shares. We’ll cover everything from buying shares to receiving stock dividends.

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What Can You Trade?

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Account TypeEURUSD Spread FromCommissionExecutionMin. DepositChoose Account
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Professional Account1.0 pip$0Market$10 Open Account
Islamic Account1.0 pip$0Market$10 Open Account
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Capital.com

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87.41% of retail investors' accounts lose money.

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2016

Spreads From

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Platforms

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What Can You Trade?

  • Stocks
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  • Forex
  • Commodities
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Funding Methods

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Exchanges

UKRussiaSingaporeJapanIrelandCanadaFinlandAustraliaUSABelgiumSwitzerlandSwedenSpainNorwayNetherlandsItalyFrance

Account

Account TypeEURUSD Spread FromCommissionExecutionMin. DepositChoose Account
Demo Account0.6 pip$0Market$10,000 Open Account
Retail Account0.6 pip$0Market$20 Open Account
Professional Account0.6 pip$0Market$20 Open Account
close

XTB

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Visit Broker

85% of Retail investor accounts lose money when trading CFDs with this provider.

Regulated By

Regulated By

FCA, KNF, CYSEC & FSC

Used By

Used By

495,000+ Customers

Established in

Established in

2002

Spreads From

EURUSD 0.5 Points

Platforms

DesktopMobile

What Can You Trade?

  • Stocks
  • ETFs
  • Forex
  • Commodities
  • Indices
  • Crypto

Funding Methods

VisaSafetypayWire CardMaster CardNetellerPaysafe

Exchanges

BelgiumFranceItalyNetherlandsNorwayPortugalSpainSwitzerlandUKUSADenmarkFinlandCzechPoland

Account

Account TypeEURUSD Spread FromCommissionExecutionMin. DepositChoose Account
Demo Account0.5 pip$0Market$100,000 Open Account
Standard Account0.5 pip$0Market$0 Open Account
Islamic (Swap Free) Account0.7 pip$0Market$0 Open Account
close

AvaTrade

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Visit Broker

74% of CFD accounts lose money.

Regulated By

Regulated By

CYSEC, FSA, FSC, FSCA & FRSA

Used By

Used By

400,000+ Customers

Established in

Established in

2006

Spreads From

EURUSD 0.9 Points

Platforms

DesktopMobileMT4MT5

What Can You Trade?

  • Stocks
  • ETFs
  • Forex
  • Commodities
  • Indices
  • Crypto

Funding Methods

SkrillVisaWire TransferMaster CardNetellerBitcoin

Exchanges

SpainSwitzerlandUKUSACanadaJapanChinaIndiaKoreaTaiwanThailand

Account

Account TypeEURUSD Spread FromCommissionExecutionMin. DepositChoose Account
Demo0.9 pip$0Market Execution$10,000 Open Account
Retail0.9 pip$0Market Execution$100 Open Account
Professional0.0 pip$0Market Execution$10,000 Open Account
Islamic (Swap Free)0.9 pip$0Market Execution$100 Open Account
close

Pepperstone

Min $10

Visit Broker

74% of retail investors' accounts lose money.

Regulated By

Regulated By

ASIC, FCA, CYSEC, BaFin, DFSA, CMA & SCB

Used By

Used By

300,000+ Traders

Established in

Established in

2010

Spreads From

EURUSD 0.7 Points

Platforms

MT4MT5cTrader

What Can You Trade?

  • Stocks
  • ETFs
  • Forex
  • Commodities
  • Indices
  • Crypto

Funding Methods

SkrillVisaWire TransferUnionPayPOLi TransferMaster CardNetellerPaypalBPay

Exchanges

UKUSAAustralia

Account

Account TypeEURUSD Spread FromCommissionExecutionMin. DepositChoose Account
Demo0.7 pip$0Market$50,000 Open Account
Standard1.0 pip$0Market$10 Open Account
Razor0.1 pip$7/lotMarket$10 Open Account
Islamic (Swap Free)1.0 pip$7/lotMarket$10 Open Account
Professional0.7 pip$0Market$0 Open Account
close

Summary

Investing is the process of putting your money into something with the expectation of increasing its value. You can invest in a wide range of assets, like stocks, bonds, real estate, and mutual funds with the hope of increasing your net worth or providing cash flow for yourself. It is important to note that while the goal of investing is to make money, you can also lose money in your investment in any asset class.

One of the best ways to invest your money is by buying shares in a company. A share is, as the name implies, a part of a company’s ownership. Company owners give out shares to invite other people like their family, friends, business associates, or members of the general public to become part owners of the company for a fee. This way, the value of the shares of shareholders/investors increases as the company grows. However, buying shares is not always guaranteed to give you a prosperous financial future. Sometimes, the businesses you invest in could lose money and cost you your investment. 

It used to be a hassle to purchase shares in the early days of the stock market. Thankfully today, you can buy stocks from the comfort of your home using a smartphone or desktop device with an internet connection. You can also monitor stock prices and make decisions from your home. In this article, we will go through how to buy shares in a company, the different types of shares, the risks involved in buying shares, and other commonly asked questions about buying stocks.

What is a Company Share?

A company share, also known as a stock, is a unit of ownership in a company. When you buy a share of a company, you become a part-owner of that company. Companies issue shares to raise money. This money can be used to fund growth, new product development, or other business initiatives. 

When you buy a share of a company, you become a shareholder, which gives you some rights and privileges in the company; like the right to vote on corporate matters, the right to receive dividends, and the right to sell the shares even if it has become much more valuable than when you initially purchased it.

The price of a company’s shares is determined by the supply and demand for those shares. If the stock has more buyers than sellers, the share price will go up, and vice versa. The supply and demand of a company’s shares could be affected by the company’s financial performance, bad publicity, the state of the economy, and interest rates. 

There are lots of benefits to owning shares in a company, like the potential for high returns, liquidity, potential for capital gain, and so many others. Buying shares also comes with a few risks, like the potential to lose money due to volatility and bankruptcy of the company you invest in.

Pros and Cons of Buying Shares in a Company

Here are some of the benefits and downsides of buying shares in a company.

Pros

  • Potential for High Returns
  • Portfolio Diversification
  • Liquidity of Assets
  • Opportunity to Participate in a Company’s Growth

Cons

  • Potential Loss of Investment
  • Time Commitment involved in Buying and Monitoring shares

How to Buy Shares in a Company

Buying shares in a company is as easy as following a few steps. The steps include:

  1. Select an online stock broker.
  2. Create an account with the broker. 
  3. Verify and deposit into your account. 
  4. Research the share of the company you want to buy. 
  5. Enter the number of shares you want to buy.
  6. Buy shares using the right order. 
  7. Optimize your stock portfolio. 
  8. Monitor your shares to decide when to sell or not. 

Types of Shares

While all shares offer a part ownership of a company to the shareholders, they are not created equal. There are different shares for different companies because investors have different needs. For example, some investors want a high potential return, while others want a more stable income.

Some of the different types of shares that cater to these needs are:

Equity/Ordinary Shares

These are the most common types of shares. These shares give you rights and privileges, like voting on corporate matters, receiving dividends if the company declares them, and sharing in the company’s assets in the event of liquidation. Equity shares are often volatile, due to the sensitivity of the price to changes in the company’s financial performance and overall market conditions. On the other hand, they offer the highest potential returns, as equity shareholders are entitled to a share of the company’s gains.

Equity shares are great for retail investors who wish to diversify their portfolio with shares from different companies.

Preference Shares

Preference shares, also known as preferred stocks, offer investors with a little more rights and privileges than equity shares. For example, preference shareholders have the right to receive dividends first in the event of a liquidation. Some preference shareholders also have a fixed dividend rate on their stocks, which means that they receive a set amount of money per share each year, regardless of the company’s financial performance, removing every fear about volatility that may arise from poor financial handling or market conditions. 

On the flip side, they offer low potential returns than equity shares, and are less liquid, meaning harder to sell and buy.

Differential Voting Rights (DVR) Shares

Differential voting Rights or DVR shares are shares with different voting rights from equity shares. This means that these shares can have either lower or higher voting rights than equity shares. This type of shares is often offered to key stakeholders and promoters so that they can keep control of the company even if they do not own a majority of the shares.

These shares can often be seen as unfair to minority shareholders, leading to conflicts of interest between DVR shareholders and other shareholders.  

Treasury Shares

Treasury shares are shares that were once outstanding shares available to the public but have now been bought back by the company that issued them in the first place. Companies can buy back shares for many reasons like to reduce the number of shares outstanding to increase earnings per share, to return capital to shareholders in the form of stock dividends, or to prevent a hostile takeover.

Companies can decide to hold their treasury shares for future issuance to shareholders or cancel them, permanently reducing the amount of outstanding shares available in the market.  

Where to Buy a Company Shares

If you are looking to buy a company’s shares, the best way to do this is through a stock broker. A stock broker is a licensed professional who helps investors buy and sell shares on the stock market. There are a few factors to consider when choosing a stock broker to buy company shares. Some of these factors are:

  • Fees and commission: Find out what it costs to trade with the broker you plan on trading with. Look at the trading commissions, spreads, account maintenance fees, withdrawal fees, overnight fees, and so on.
  • Trading platforms: Check if the broker offers trading on your mobile and desktop devices. Check the trading platforms offered on these devices to see if you are comfortable using them.
  • Tools and services offered: Tools for fundamental trading analysis should be available on a broker’s trading platform before you consider using them. Also, check if they offer services like fractional share trading.
  • Customer services: This is especially important if you are a rookie trader. Confirm that they have a quick and active customer service team.

Some best stock trading apps to consider when buying company shares are eToro, Capital.com, TD Ameritrade, and Fidelity.

Buying Shares in a Company Online

Stock trading has existed for centuries, from the earliest known stock exchange (Amsterdam Stock Exchange) in the 17th century. Then, stock brokers had to physically go to trading floors to find other brokers who were willing to sell by shouting out their offers or using hand signals. Today, investors can buy company shares online from the comfort of their homes without their stock brokers needing to shout on trading floors.

To buy shares in a company online, you need to open an account with a stockbroker, deposit funds into your account, and place an order for the company’s shares you want specifically. Before you trade with a broker, it is important to look out for their fees and commissions. Brokers like eToro offer commission-free trading, which means you don’t have to pay commissions for trading any stock.    

Buying Real Shares vs Trading Share CFDs of a Company

If you are interested in the shares of a company, you can choose to buy them or trade them using Contracts for Difference or CFDs. CFDs are derivative contracts that allow you to speculate on the price of an underlying asset, such as a share. When you trade share CFDs, you don’t own the underlying shares. You trade on how you think an asset will perform in the future, and get rewarded if your prediction is right, or lose money if your prediction is wrong. The benefit of trading CFDs is that you can also speculate that an asset will drop in value and get rewarded for it. 

Whereas, with buying real shares, you can only get rewarded as long as your stock increases in value. CFDs also use leverages, which means traders are not required to pay the entire value of the stocks they wish to purchase. This means that they can buy leveraged stocks worth more value than the amount in their trading account and reap higher rewards if their speculation is right. However, leverages are double-edged swords, meaning they also work the other way and magnify the losses if the speculation is wrong.

Before choosing to buy any real stocks or trade share CFDs, think about what your trading and investment goals are. Do you want to speculate for potential profit? Or are you willing to hold a part ownership in the company for the long term? Also, consider your trading experience. If you are a rookie, you are better off buying real shares and holding on to them for a while before testing your trading skills with more complex methods like CFDs. 

Risk of Buying Shares

Like many things with a lot of good benefits, there are lots of downsides and risks of buying and trading shares. Some of them are:

Risk of Share Price Falls

The price of your shares could drop over time, causing you to lose some capital. There are many reasons why a company’s share price could drop. Some of them are:

Company-specific problems: A bad management scandal, product recall, or a decline in the company’s market performance could cause the shares to fall in price.

Industry-wide problems: Things like increased cost, rising competition, regulatory issues, or changing customer tastes within a specific industry could lead to a loss of share price of companies within an industry. If the company you invested in faces these issues within the industry, you might see your share value drop significantly

Economic problems: General economic problems like recessions, inflation, trade wars, interest rate hikes, or geopolitical tensions could lead to a drop in share prices across companies in a country or region. When this happens, investors in those companies lose some of their capital.

Loss of Funds

In the worst-case scenario, a company could go bankrupt and cease to exist completely. When this happens, shareholders in the company lose all their capital. This is not very common, but not impossible.

Liquidity Risk

This problem arises when you find it difficult to sell your shares quickly at a reasonable price. This usually happens when the company you’ve invested in is not a well-known company or if there is a lot of uncertainty about its future.

Volatility Risk

The value of your share in a company can fluctuate very wildly, making it difficult to estimate the appropriate value of a stock and causing investors to make decisions that cost them money. Here are some tips to help deal with the risks you will face when buying shares in a company: 

Diversify your portfolio: When it comes to buying shares in companies, try not to keep your eggs in one basket. Investing in a variety of different companies and industries will dramatically reduce your risk.

Invest for the long term: Don’t try to time the market, no one can successfully do this. Instead, adopt the mindset of investing for the long term in companies you truly believe in.  

Understand your risk tolerance: Understand how much risk you are willing to take and do so accordingly. Not everybody can be cool with investing $10,000 and moving on if things don’t go as planned. 

Practice a lot: Learn about stock trading by practicing with a demo account and studying about stocks before going into complex trading practices. As a rookie investor, you need to learn and practice the basics of stock trading continuously to stay informed and reduce avoidable risks.

What Reddit and Quora Say About Buying Shares in a Company

We went through  Reddit and Quora, two of the biggest social communities online to see what people had to say about how to buy shares in a company.

Reddit

Reddit is one of the biggest social platforms online, with over 500 million users. With topics ranging from sports to tech and finance, the platform offers you insight into the experiences of hundreds of thousands of people who have used a certain product or know a thing or two about what you’re interested in. We went through the subreddits on this platform to see what people thought about buying shares in a company.

The first post we saw on the platform was from a Redditor who wanted to know if and how companies benefited from people buying their shares. 

Reddit user review on buying shares

One person explained how shares helps companies, especially startup tech companies to grow fast by attracting important talent. They explained that startup companies with good share prices can offer stock options to lure important talent to work with them.

Reddit user review on buying shares in a company

In another post, a Redditor wanted to know which stocks to buy and what was the best process for finding the best stocks to buy. As a trader, he was interested in buying stocks but didn’t just want to go for the big obvious companies because everybody was going for them. He wanted to know if there was a solid process for vetting stocks and picking the right one(s).

How to invest in stocks by a Redditor

One redditor advised him to think about companies that were constantly making stuff we use in our daily lives, like make-up, elevators, etc. This interest in these companies would then drive him to learn more about the industries and focus on the key players in them. Reflection and study of these companies would drive him closer to good stocks to invest in.

Reddit user review on buying shares

Quora

We also went through Quora, a social community with hundreds of millions of followers, to find out what they thought about how to buy shares in a company.

In the first post we saw, the poster wanted to know if it was possible to purchase shares in any company, even companies outside their country. Another Quora user explained to the OP (Original Poster) that they could buy stocks of most companies in the world, as long as there were no restrictions placed by their country to trade in any particular country’s shares. He also explained that the OP had to get a trading account with a stock broker to start trading. He advised the OP to research the stock broker properly before trading with them.

Quora user review on buying shares in a company

In another post, the poster wanted to know how to choose and buy the shares of a company. Another Quora user explained that the OP needed to check for companies with strong fundamentals, like their Profit after Tax, Return On Equity (ROE), and Debt Equity Ratio. He also explained that choosing the right broker was also important for trading success. 

Quora user review on how to buy shares

Bottom Line

Buying shares in a company is one of the most common forms of investment around the world. It gives you voting rights in a company, and the right to increase in investment value if the company becomes profitable. It is also a great way to diversify your investment portfolio and own a piece of a company you’re interested in. However, without understanding the fundamentals of how to buy shares in a company, you could make mistakes and lose your capital.

In this article, we went through what a company share was, the different types of shares, where and how to buy company stocks, how to buy stocks online, trading stock CFDs, and the risk of buying shares. We also shared some tips on how to avoid the various risks associated with share trading and took a quick look at sentiments from traders/investors on Reddit and Quora.  

Q & A

Buying shares of a company makes you a part owner of the company. It gives you some voting rights, and the right to share in the company’s gains if it becomes profitable. On the other hand, you bear the responsibility of a loss if the company loses its value.

 

When you buy shares in a company, you incur the cost of the share, along with other charges like brokerage commission, margin interest (for margin trading), stamp duty, and other exchange fees. Check with the broker you’re trading with to learn about all the fees you’ll likely pay.

 

 

Some of the industries with the best shares include technology (like Tesla & Apple), healthcare and financials.

 

No, not all shares give voting rights in a company. 

 

The recommended time to hold a company share is as long as the company’s fundamentals are strong and you believe in its long-term prospects.

 

Yes, you can buy fractional shares of a company if you can’t afford to buy a whole share.

 

Yes, you can buy shares from a company without an online broker using other different methods like Direct stock purchase plans (DSPPs), which allow you to buy directly from the company, and transfer agents, which are companies that manage the shareholder records of publicly traded companies.  

 

There is no set minimum amount required to buy a share of a company.

 

The share price of a company is influenced by a number of factors, including the financial performance of the company, the industry prospects, price-to-earning ratio, interest rates in the economy, inflation, and many others.

 

No, not every company buys back their shares.