Stock Investment For Beginners
An Opportunity To Get Rich
18th Nov 2012
Stock investment can be extremely lucrative but at the same time, it can also be very
risky and a costly lesson for those who are not well prepared for it.
Stock which is also known as share or equities is the very first step
every beginner needs to know what it is all about. Its associated features, understanding the basics of the stock
market and knowing how it works differentiate between success and failure for new beginners.
Stocks represent ownership in a company. A listed company issue stocks
which are bought and sold normally through the stock exchanges. Stock trading as this process is known, takes place
in the stock exchanges which can be a physical place e.g. NYSE or an electronic platform e.g. Nasdaq.
A stockbroker representing a brokerage firm (or simply brokerage) is
licensed to buy and sell securities for clients in the securities exchange. You have the option of two general ways
to trade stocks, either through the traditional full service broker or a discount broker.
A full-service broker provides you with a wider range of financial
products and services including retirement planning or research and advice, tax tips and much more. In line with
you get what you pay for, full-service brokerages are more expensive than discount brokerages. Commission for
engaging a full service broker can be as high as $150 or more.
For people who do not have the luxury of time to stay up-to-date on
complicated issues such as tax or estate planning or trending market conditions , full-service brokers may be the
way to go. However, every investor should be aware on the possibility of churning , i.e. your broker advise you to
trade more than needed as full-service brokers make money on the volume of trade rather than performance of your
Some of the major full-service brokerages around are Merrill Lynch, Edward
Jones, Raymond James, Morgan Stanley, Wells Fargo Advisors and UBS.
The advent of the internet leads to the proliferation of discount
brokerages and lowering of cost to do business. Commissions can be as low as $5-$10 for engaging the services of
discount brokerages which unlike full-service brokerages, offers no investment advice. This helps make investment
activity more affordable and opens the gate to stock market investment to a wider market which until recently was
the exclusive domain of the wealthy.
While commissions may be low, these brokers here make money on the high
volume of trade that goes through. If you are on a smaller budget, with a D.I.Y nature or have an interest to
learn, a discount broker is a good way to kick start your investment activity.
Popular discount brokerages are people like Ameritrade, Tradeking, ETrade,
Fidelity and Charles Schwarb.
Once you have chosen a stockbroker and understand their terms for
transaction, you can begin picking your first stock and holding onto them until they increase in price before
you sell it for a profit.
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