How buying and selling works

Brokerages and exchanges

You don't buy stocks directly from a company. You open an account with a brokerage, a firm licensed to place orders for you on stock exchanges like the NYSE or Nasdaq, where buyers and sellers are matched.

Each investment has a short code called a ticker. For example, AAPL is Apple. Funds have tickers too. Always double-check the ticker, since similar-looking codes can be completely different investments.

Placing an order

• A market order buys or sells right away at the best available price. It's simple, but the price can shift a little by the time it fills.
• A limit order sets the most you'll pay (or the least you'll accept when selling). It only fills at that price or better, so it might not fill at all.

There's always a small gap between the highest price a buyer offers (the bid) and the lowest price a seller asks (the ask). For large, popular funds this gap is usually tiny.

Fractional shares and automatic investing

Many brokerages let you buy fractional shares, so $50 can buy part of a share that costs $400. Many also let you set up automatic investments on a schedule, which is one of the easiest ways to build the habit.