Let’s talk about how you, the investor, can go about purchasing stock. Stocks are the most basic product you can purchase on an exchange. are a type of security that represents ownership in shares issued by a publicly traded corporation. Stocks are unique among security types in terms of the rights that they give you. Owning shares of stock gives you…
- the right to vote in shareholder meetings.
- the right to receive dividends (which are the company’s profits) if and when they are distributed.
- the right to sell your shares to somebody else.
Additionally, if you own a majority of shares, your voting power increases so that you can indirectly control the direction of a company by appointing its board of directors. The stock market is sometimes called the equity market because when you buy stock, you are buying equity (ownership) in the company.
How do I buy stock?
I thought you would never ask! In order to buy stocks, you can either use an online broker or seek the assistance of a stockbroker who is licensed to purchase securities on your behalf.
Most people these days use online brokerages rather than traditional human stockbrokers. If you do use an online brokerage, the cost is usually based on a per transaction or per share basis. This allows you to open an account with relatively little money. If you want to learn to invest on a shoestring budget, consider taking my FREE 5-day investing course.
Some of the most popular online brokers include TD Ameritrade, my boy Charles Schwab, E*Trade and Optionshouse. They are easy to use. All you do is go to the company’s website, sign up for an online account and transfer funds into it. See, easy peasy, just like opening a bank account. The only difference is that you are opening your investor account online versus walking into a brokerage office.
Once your account has funds in it, you can place your order. You can either pick the stocks you know you want to use or use the search feature to filter stocks by criteria.
Full-service brokers are the traditional stockbrokers of the old days. They take the time to sit down with you and get to know you personally and financially. They look at factors such as marital status, lifestyle, personality, risk tolerance, age (time horizon0), income, assets, debts and more. Full-service brokers will then work with you to develop a financial plan best suited to you and your investment goals and objective.
They can also do things such as assist with estate planning, tax advice, retirement planning, budgeting and any other type of financial advice. Hence the term, full-service. Then can help you manage all of your financial needs now and for the rest of your life until you transition on to glory. Now you already know, full-service broker fees are typically much higher than online broker fees.