How to Buy Stocks

First Option:

1. Acquire at least $3,000 in a checking account, and grab your account number and routing number. (It's written on the bottom of your checks.)
2. Go to Vanguard.com and open an account.
3. Buy into VTSMX, the total market index fund, or VFINX, the S&P 500 index fund. If you have trouble picking, flip a coin; they're very similar funds.

Second Option:

1. Go to Sharebuilder.com and open an account. They shouldn't require a significant starting balance, but might.
2. Sign up for automatic investing to take advantage of dollar cost averaging.
3. Buy VFINX or VTSMX.

Third option:

1. List out what you know about a company.
2. List out what the market knows about that company.
3. If your knowledge is better than the market's, then proceed. Otherwise (including if you don't know how much the market knows), go to option 1.
4. Go to your bank and read about their brokerage accounts. If the fees aren't excessive (check Sharebuilder and other banks and stuff like etrade), open a brokerage account, or go to option 2 and open a Sharebuilder account.
5. Transfer money to your brokerage account.
6. Plan out your trades: under what conditions will you buy a stock? (not "the price now is ok" but "if it's less than $60 I think it's worthwhile.") Under what conditions will you sell a stock? This is mostly a restatement of steps 1 and 2, but it's nice to have these numbers for every individual stock.
7. Execute trades; the interface should be straightforward.

The last option is very rarely a good idea. You cannot pick good stocks- good stocks do not exist. What exists are good companies and good opportunities. Companies that everyone knows are good- like Apple- are rarely good opportunities, but sometimes the company is so good that it's worth buying at a premium. I'm up 9x on Netflix over 4 years, even though I bought it at a fairly high price, because I recognized that it was going to reshape its industry and eat Blockbuster's lunch. I'm up 50% on BP because I was able to identify the point of maximum pessimism and buy then. That's 2 significant winners over the last 4-5 years of active investing. I'm in the black overall only because of how awesome Netflix was; there's a lot of stocks I bought that lost a bunch or merely tread water. I now take the opportunity approach seriously.

The moral of the story is that you should hunt opportunities where you have something the market lacks, and then bet big on those opportunities. If you don't have any more knowledge than the market, bet on the market as a whole in an index fund. I had more foresight than the market as a whole when it came to Netflix (but not to many other things I bought) and a sterner stomach than the market when it came to BP, but without that edge I'm not comfortable betting on anything but that the general trend of the market is up.

(You can still lose when you've got an edge- one of my friends called the tech bubble and shorted the market, but was early by a few months and lost quite a bit of money- but it's the best and most consistent way to win.)