How To Buy Stocks: Taking The First Steps

In this section you can find out how to buy stocks for your personal investment portfolio. I will go over several different methods that are available.

As a review from my Basics page, when buying any particular stock you are buying a part ownership in the company whose stock you purchase.

This is something that requires a good amount of research before you decide to make that purchase.

If you don't do any research ahead of time, you are basically gambling and are increasing the odds of losing all of your investment in that particular stock.

In order to buy stocks for yourself, you will need to open a brokerage account with an online broker, through the brokerage portion of your banking institution or at a full service brokerage firm.

As you are deciding where you want to open an account, you will also have to learn about the different types of accounts that are available as well.

If opening an account with an online broker, you will be buying stocks online through the broker's website or with a trading platform that they will provide for you.

Using the online brokerage account, you can usually buy and sell: stocks, bonds, mutual funds, CD's and Exchange Traded Funds (ETF's). All of your investment decisions will be made by you, including any decisions to buy or sell, as well as what to buy or sell.

One of the benefits of using an online broker for buying stocks, is that you will generally be charged a lower commission than if you choose a full service broker.

If you want to have a hands on approach to your investing and like doing your own research, then buying stocks through an online broker is the way to go and the next step is to learn how to place a trade.

If when learning how to buy stocks you decide that you don't want be involved with the actual buying or selling of your investments, just on having the final say as to what to buy or sell, than you may want to consider a full service broker.

A full service broker charges higher commissions, or sometimes a percentage based on invested assets. In return, the full service broker will make all of the trade executions for you, and will be there to provide recommendations for your personal situation.

Choosing between the two will depend on how much you want to be involved with the actual trade executions, and how much assistance you will need in making your own financial decisions.

Some people just want to be able to pick up the phone and ask a full service broker to buy or sell for them based on the broker's recommendations, and then just wait for their monthly statements to come to look them over.

If this is you, then the answer to "How to buy stocks" for you is with a full service broker.

Even if you will not be making a lot of stock trades in your account, an online broker can save you a lot of money as long as you are willing to do your own research and keep an eye on your investments.

Some firms even have reduced commissions for additional automatic investments you make. For example, when you purchase shares of xyz stock in January, and then you set up to purchase an additional $100.00 worth of XYZ every month thereafter automatically, you can qualify for reduced commissions at certain brokers.

This can really add up for the long term investor who is willing to wait for a good return on their investment.

An additional way of buying stocks is to purchase them through Dividend Reinvestments Plans, also known as DRIPs. DRIPs involve initially purchasing at least one share of a company's stock, subscribing to the DRIP and then any dividends that the company is going to distribute is used by the company to directly purchase additional shares of stock in your name. This results in very low or no commissions.

With today's competitive markets, you can open an online brokerage account and get commission free trades with certain limitations. To find out more on brokers in general as well as on specific brokers, take a look at my "Brokers" section of this website.

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