Stock Basics: Buying Stocks
You've now learned what a stock
is and a little bit about the principles behind
the stock market, but how do you actually go
about buying stocks? Thankfully you don't have
to go down into the trading pit yelling and
screaming your order. There are two main ways
to purchase stock:
1. Using a Brokerage
The most common method to buy
stocks is to use a brokerage. Brokerages come
in two different flavors. Full-service brokerages
offer you (supposedly) expert advice and can
manage your account but also charge a lot. Discount
brokerages offer little in the way of personal
attention but are much cheaper.
At one time, only the wealthy
could afford a broker since only the expensive,
full-service brokers were available. With the
Internet came the explosion of online discount
brokers. Because of them nearly anybody can
now afford to invest in the market.
We've actually got a whole
separate tutorial on brokers and online trading,
and you can check it out here.
2. DRIPs & DIPs
Dividend Reinvestment Plans (DRIPs)
and Direct Investment Plans (DIPs) are plans
with which individual companies, for a minimal
cost, allow shareholders to purchase stock directly
from the company. Drips are a great way to invest
small amounts of money at regular intervals.