Stock Market Basics: How to Buy Stock
Every day on the news, we see how stock markets all around the globe performed. Even if you know nothing about investing, you can tell that it is a good thing when the market goes up and a bad thing if the market goes down, but how can you get in on helping to make the market what it is? How can you, an average person who is thinking about investing for the very first time, buy stock in companies and, hopefully, build real wealth from it? Buying stock is easy as you have three main options: you can buy stock directly from a company, you can use a stock broker and buy stock through them or you can open up an online stock trading account and buy stock that way. Each choice has its own benefits and drawbacks, so let's take a look at how it is all done.
The most direct and straightforward way to buy stock is through a company. Many popular companies offer the option of buying stock directly through them, although some companies limit stock buying to employee members and their families. An advantage of buying stock directly through a company is that you don't have to pay any commissions or broker fees, which can keep the initial cost of your investment down. You might also get a better stock price than if you bought it in a more traditional manner. Drawbacks include the fact that you will need an account with each company to buy stock through them, which can be tedious if you own ten different kinds of stock. If you had an online broker account or a regular stock broker account, you would only need one.
The easiest way for someone to buy stock is with a stock broker. This is especially true if you are new to investing, and you are not sure what stocks you want to buy or how much of your savings you want to invest. With a stock broker you can also get expert advice on how a particular stock investment looks and if it is a good idea to buy it or not. If you buy stock directly from a company, you won't get any investment advice at all, just like if you were to use an online broker since you are essentially flying blind.
Finally, the most popular option for experienced traders is to use an online broker site like E*Trade. With online brokers, you decide what stocks to buy, how much stock to buy and you execute the trade yourself. There is some very basic advice available through the website you use but the stock analysis is very poor when you compare it to the advice you would get from having a real broker. Using an online trading site is never recommended for new investors since you are essentially playing around with your life savings, and you likely don't have the experience you need to make the right choices. Think of a stock broker as a safety net that can stop you from making a big mistake. When you choose to invest directly in a company, you don't have that safety net either.
Buying stock is a great way to build personal wealth and a great way to introduce yourself to the world of investing, but it should never be done haphazardly. If you do choose to invest on your own, make sure you do as much research as you can into the company you are looking to invest in, and remember, even people who invest for a living sometimes get things wrong. There is no such thing as a risk free investment.
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