Investing Advice

How to buy stock?

Buying stocks is not as simple as walking into a stockbroker's office and buying shares like you would a pair of shoes from a store. You are required to open an account with the brokerage, like opening an account at a bank. Some brokers will allow you to open an account with very little money. The firm will then hold this money in an interest earning cash account, awaiting your orders to buy or sell stock, or other securities such as bonds or mutual funds. When you buy or sell, you pay a commission which is deducted from your account.

When a stock is purchased, the ownership of the shares may be listed in one of two ways. "Listed" means how the corporation tracks the ownership of their stock. If you choose to have the stock listed in your name, you will receive the actual stock certificates.

Most investors choose to have the ownership listed in the broker's name, called "held in street name", with the broker keeping track of whose trading account the stock actually belongs to. The benefits are reduced paperwork, consolidated portfolio statements, no concerns about storing and processing the paper certificates, and the ability to instantly sell and transfer the shares. Either way, any dividends are credited to your account.

Stocks held in street name are insured up to $500,000 by the federal government against fraud or financial failure of the brokerage company.

Other Stock Market Basics Topics:

  1. Stock Market Basics
  2. Why invest in the stock market?
  3. Why Sell Stock?
  4. How are shares bought and sold on the NASDAQ?
  5. How stocks are traded on the New York Stock Exchange
  6. What are ECNs?
  7. Supply and Demand
  8. American Stock Exchanges
  9. International Stock Exchange
  10. What fuels demand for a stock?
  11. More to Know About Stock Trading
  12. Limit Orders
  13. Market Capitalization
  14. Preferred Stock
  15. How to Buy Stock?
  16. How much money do you need to open a brokerage account?
  17. Money Market Funds
  18. Margin Loans and Investment
  19. Corporation Executive Pay
  20. How much money do you need to open a brokerage account?

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