Learning how to buy shares is easy. The physical process is as simple as buying a pair of shoes. In a shoe store, a customer simply decides what he or she wants, selects a pair of shoes, takes them to a cashier and pays the bill. In a stock transaction, an investor decides what stock to buy and how many shares. The investor contacts a stockbroker who places the order. When the stock is paid for, the investor owns the shares. The only decision investors really need to make is whether to do these purchases one at a time or use investment accounts.
People who purchase shares of stock occasionally may prefer to leave the money in a savings account until it is needed. When it is time to make an investment, these people simply contact a stockbroker to place the order. Once the broker has the funds, he or she will purchase the stock and deliver the certificates to the owner. These investors control everything and only hire the help they need when they need it. After all, stockbrokers need to be licensed to buy and sell stock.
Many people use investment accounts to obtain shares. These individuals are more active in the stock market and may use the assets of their individual retirement accounts. Transactions are quicker and easier as the investor has already chosen the stockbroker and deposited money with that company. All this individual does is issue an order.
Stockbrokers offer three different types of accounts allowing investors to select the one that is right for them. These three accounts are:
• Full service accounts. The broker calls the investor with stock tips and provides documentation supporting the recommendations. Since stockbrokers are paid a commission, these individual usually collect a percentage of the stock cost.
• Discount accounts. These stockbrokers provide an order desk where investors call in with instructions to buy so many shares of a stock. The order is placed, money is withdrawn and the shares of stock are added to the account. Costs are low flat fees usually between $10 and $20 per transaction for up to 1000 shares. Typically, this fee is one third of a full-service brokerage charge.
• Online accounts. Investors do all of their own work through a website provided by a stockbroker. The cost of each trade ranges between $7 and $15 depending on the broker. When investors want to buy stock, they simply turn on the computer, go to the website, enter the right account number and place the order. The webpage shows the current price of the stock. Once the order is submitted, the investor owns the stock.
Buying shares is easy. Stock is like clothing or any other commodity; consumers simply decide what they want, order it and pay for it. The hard part is deciding what to purchase and how much. Two excellent websites are www.investopedia.com and money.cnn.com. These sites give consumers valuable information about the stock market and investing.