How to Buy Stocks Without a Broker

Many folks buy and sell stocks using full-service brokers. Using a brokerage firm typically means you don’t have to do much, but you’ll also pay fees.

I used to think buying stocks with a broker was the best way. However, I’ve recently changed my mind and want to invest myself without paying brokerage fees.

I discovered that buying stocks without a broker is easy when I use automated investing platforms like Betterment, M1 Finance, and Robinhood. These brokerage platform apps allow me to open a brokerage account even if I have only a few dollars to invest. Most of the investments are self-directed. However, the apps allow me to buy stocks in curated portfolios.

All three provide commission-free trading and are easy to use. They also allow me to buy fractional shares, so I don’t need a lot of money upfront. All three are good for new investors because they provide options to choose curated portfolios.

I’ve checked out all three apps and will provide a step-by-step tutorial. All of them are easy to use. If you want to invest in using the apps, you should research to find the best one for you.

I generally find Betterment a better choice if I don’t want to make too many decisions. I find M1 a better choice if I want all my finances, including savings, checking, borrowing, and investing in one app. Betterment and M1 are good choices for new investors because they offer the option of curated portfolios based on my answers to questions.

I find Robinhood a better and easier choice for buying and selling shares of individual stocks or EFGs if I already know what I want. It provides very little investment advice or information on the free site.

I can pay an additional modest monthly fee to access research information. Personal circumstances will dictate which app is the best fit for your needs.

Definitions

Before I describe how to invest in each app, I’d like to give you some basic definitions of investment terms I’ve learned.

• ETF– ETF stands for exchange-traded fund. An exchange-traded fund is a well-diversified portfolio similar to a mutual fund but is not professionally managed.
• Stock’s ticker symbol. A stock’s ticker symbol is a unique set of letters assigned to identify the stock on its stock exchange. It can have one, two, three, or four letters.
• Taxable accounts. All accounts are taxable immediately unless you set them up as tax-deferred retirement accounts. Tax-deferred retirement accounts are still taxable, but only when you take the money out later. Consulting a tax expert will help me understand the tax consequences of my trades.
• Margin account. A margin account allows investors to borrow against their existing investments to make additional investments or for other purchases. Margin borrowing is convenient, but it is risky because stock prices fluctuate constantly. If they decrease while being borrowed against, I could end up having to sell my stocks.
• Portfolio. An investment portfolio is a collection of assets I own, such as bonds, cryptocurrency, and exchange-traded stocks. Diversifying a portfolio tends to lower its risk.

Now that we have some basic definitions let’s go through the steps of setting up an online brokerage account for each app and preparing to invest.

How to Buy Stocks Without a Broker

Buy Stocks on Betterment

Betterment provides opportunities for automated investing and socially responsible investing. It suggests a portfolio based on my risk tolerance but allows me to change it if you want.

Betterment also provides the opportunity to choose from curated portfolios such as innovative technology, broad impact, social impact, and climate impact. Betterment allows me to do general inventing or to set aside money in tax-advantaged accounts for retirement. It also allows me to set up recurring deposits to keep me on track.

Betterment: Step by Step

Here are the steps for investing in Betterment.

• Go to the home page and click Get Started. The screen will ask you a series of questions to sign up, including email, password, legal name, and phone number. You’ll also have to read and agree to certain conditions.
• After setting up your account, you’ll go to an introductory page that allows you to set a goal for your savings, invest for retirement, or answer a few questions to get a recommendation. I chose to answer the questions for recommendations.
• When I clicked on the option to answer questions, I got a new screen asking me to enter my address. (You must be a U.S. resident.)
• The next page asked for my Social Security number and birthdate. The following page asked me to choose security questions.
• Once I had done that, the app directed me to a series of screens that asked about my financial situation. It asked about where I worked, how many hours I worked, whether I was married or single, what my income was, and how much experience I had with investing. These questions complete my profile.
• Next, I answer questions about my motivations, such as retirement planning, saving for emergencies, or becoming a homeowner. The app then makes recommendations based on my choices and gives me an opportunity to set goals.
• The next page depends on what I choose. I chose general investing. I received a page that asked me whether I wanted them to pick a portfolio for me. (That choice would give me a low-cost core ETF with a mixture of stocks and bonds.) Another alternative is to choose one of the curated portfolios. The third option is to build my portfolio.

I chose a curated, socially responsible portfolio, and when I did that, I received another list of choices.

I was asked to choose among a broad impact portfolio (which focuses on environmental, corporate governance, and socially responsible goals), a climate impact portfolio (environmentally friendly), or a socially responsible portfolio (diversity). I chose the broad portfolio.

On the next page, I saw the automatic recommended allocation. Betterment had determined that I should have 73 percent stocks and 27 percent bonds because I had indicated my investment horizon over the next ten years. The mix of investments and weights includes:

• U.S. Socially Responsible Stocks – Large Cap ESGU -28.9%
• U.S. Socially Responsible Stocks – Small Cap ESML- 2.5%
• U.S. Engagement Stocks – VOTE-3.5%
• International Developed Market Stocks – ESGD- 31.2%
• International Emerging Market Socially Responsible Stocks – ESGE6.9%
• U.S. Municipal Bonds – MUB -15.4%
• U.S. Investment-Grade Corporate Bonds – SUSC – 1.6%
• International Developed Market Bonds – BNDX – 6.2%
• International Emerging Market Bonds – EMB -3.8%

Betterment provided me with a short explanation of the risks involved in the recommended portfolio and allowed me to confirm this risk level. When I do so, I will have the opportunity to set up this account. Once I do that, I return to a screen that shows my choices.

• Now, I need to fund my account. I click on deposit at the top left of the screen, which will take me to a page to enter my bank account information and a deposit.

As I continue to deposit money, the system will allocate it to the broad impact socially responsible fund I have chosen.

So that’s how I created my account and prepared to buy and sell stock and other investments in Betterment.

See Related: Best Betterment Alternatives | Apps Like Betterment 

Buy Stocks on M1

M1 is a finance super app. It offers a variety of brokerage account options. The brokerage accounts operate around a pie concept.

My pie is made up of slices. For example, a slice can be an individual slice or a curated portfolio.

I can build multiple pies built around different themes. M1 executes trades automatically during a single daily trade window.

M1 also has a checking account and margin borrowing. A credit card offers up to 10 percent in cash rewards, which are automatically used to fund my portfolio.

See Related: Best Banks for Low-Income Earners

M1 Step-by-Step

• First, sign up through M1 using your email and a password. You also provide your social security number, date of birth, and other identification information.
• Next, the application asked me about my investment style, including how long I wanted to hold my investments, how much I earned, and how much investment experience I had.
• The next screen asks me to connect with my financial institution to set up a deposit to fund the account.
• The app then sent me to an overview page that asked me to scan and send a copy of my driver’s license as an additional security measure. The overview page also tells me that I can trade cryptocurrency once I deposit at least $100.
• To start investing, I need to build my portfolio. I receive a screen to build my portfolio and click on choose securities. The app directs me to a screen with tabs on the left for stocks, bonds, my pies, and expert (or curated) pies.
  
  If I want to buy stocks, I am taken to a list of stocks of publicly traded companies with some basic investment information about each one, such as market cap, dividend yield, price history, and price-to-earnings ratio.
  
  A table on the left-hand side of the page allows me to narrow it down by sector. I click on the box to the left of the stock I wish to buy and then click add. I do that until I have chosen all the stocks I wish to buy. After each purchase, I am taken to a page that allows me to adjust how much of my pie I’d like each stock to fill. I can do the same thing with bonds or expert pies.

For example, if I choose the expert pies, I will go to a screen that allows me to choose from general investing, retirement, hedge funds, responsible investing, income earners, just stocks and bonds, or other strategies. The system provides instructions about who each pie might be most suitable for.

If I choose, for example, Responsible Investing, I will be referred to a screen that gives me domestic and international options, with the risk factors and past performance shown for each. If I click the box on the left-hand side, the pie will be added to my pie. By changing the target allocation on the screen, I can choose to make that pie all of my pie or have it be only a part of my pie.

Each time I deposit into my account, the system automatically buys stocks, bonds, or ETF shares based on the allocation percentages I’ve created in my pie. The system uses dynamic rebalancing, which means that with each deposit or withdrawal, the system will automatically seek to balance my portfolio according to my selected allocations.

So, I’ve set up my online account with M1.

See Related: M1 Finance Review: Is It Legit?

Robinhood

Robinhood allows me to invest in stocks, options, crypto, and ETFs. Options are pretty much what they sound like. They are the option to invest in something at a point in the future, but they don’t require me to purchase at that time if I choose not to do so.

Robinhood offers commission-free trading, even for cryptocurrency, and has a variety of currencies to choose from. It also offers a cash account (uninvested funds) and an accompanying debit card that provides rewards to help me build an investment habit. All Robinhood accounts are immediately taxable because they offer no retirement account options.

See Related: Best Lithium Stocks to Invest in Today

Robinhood Step by Step

• To invest using Robinhood, I first must set up my account. I do that by clicking on sign up on the home page. That takes me to a screen where I enter my email and a password. I then answer questions about my address, employment, tax status, social security number, and other information to identify me.
• I will go to an overview page where I enter information to connect to my bank account. The system uses plaid so that I can connect automatically by entering my online banking password. I can also have my paycheck directly deposited into my Robinhood account. The money would go into my cash account until I spend or invest it. The amount of money in the account is my available buying power.
• Once my account has been established, I go to a list of stocks from which I can choose or search for particular stocks if I already know the investments I’d like to make. For example, suppose I want to buy stock in Corning (NYSE: GLW). I enter Corning in the search field and receive a page that shows today’s stock price, historical performance, and key statistics. A window will be on the right-hand side of the page for me to choose how much of my available buying power I want to use to buy the stock.
  • You can also search for ETFs by typing “ETF” in the search field or choosing them from lists. For example, the 20 Most Popular ETFs or growth and value ETFs. Once you choose an ETF, you’ll see its historical performance numbers, a list of what sectors or companies comprise the fund, and a window on the right-hand side to spend some of my available buying power on the ETF.

For example, the CWS ETF includes

• Technology stocks: 18.91 percent
• Healthcare: 18.74 percent
• Consumer cyclical, 16.43 percent
• Financial services, 15.76 percent
• Industrials, 14.07 percent
• Consumer Defensive, 9.25 percent
• Basic Materials, 6.84 percent

So, trading is also easy using the Robinhood app.

See Related: Best Investments for Young Adults

Frequently Asked Questions

I had some general questions about investing through these platforms. If you’ve never bought stocks without a broker, you might still have some questions. Here are answers to some of the questions I had. I imagine they are the most common questions.

Related Resources

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• How to Start Investing With Purpose
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