How To Buy Stocks
Compared to the last 30 years, investing in the stock market then was only available to a few privileged private investors. These investors have at their disposal substantial amount of investing capital and a private banker to manage their portfolios.Nowadays, with the advancements in computing technology and the internet, the financial markets are becoming more accessible to the ordinary retail investors. Today, the private banker, a full service broker, is still available to the elite investors. In addition, there are also the discount brokers and the online brokers that a retail investor can use to access the stock market. The main differences between these brokers are the level of services that they provide and the cost involved in securing their services.
The private banker if you can afford him, as mentioned earlier provide a full fledged level of service with respect to your investments. They provide private consultations to their clients, gives recommendations as to what to invest in and help do the research to substantiate their recommendations. And also, they will even serve you tea or coffee when you have a private consultation with them! Normally, to engage their services, you will need to invest a minimum amount of capital like one million dollars or five hundred thousand dollars. Besides from charging a commission for transactions executed, they also charge a management fee for helping you to monitor your portfolio. In addition, there may also be a performance linked fee payable.
Discount brokers and online brokers on the other hand, merely help you to execute your investment decisions. The research aspect of your investment is entirely up to you. These brokers do not provide any recommendations as to what kind of stock to buy. They thrive on volume based business. Thus, their priority would be to secure as many transactions as possible within the shortest possible time. Nevertheless, if you are adept in conducting your research, then you can save yourself a substantial amount of money in relation to the transaction cost. This is not to say that private bankers are not worth their fees. They cater to a specific group of investors whose time are worth more spent elsewhere than doing research for their investment portfolio.
Typically, discount brokers and online brokers charge around $9 to $20 per trade. It has to be noted that shares on the stock market are traded in term of lots of 1000 shares. Lots less than 1000 shares are termed as “Odd lot” and are not traded generally until they are grouped with other odd lots to be 1000 shares per lot. Before deciding on the broker to use, you should also check their background. In the US, you can check the background of the broker in question by calling the National Association of Securities Dealers at 800-289-9999 or at their website at: http://www.nasd.com/index.html.
With the opening of the financial markets, competitions among the brokers have also increased. This has prompted changes and developments which had blurred the lines between a full fledged broker to that of a discounted broker. Many full fledged brokerage firms like Merrill Lynch have come to realized that in order survive in this competitive environment they needed to have an online presence. As such, it is not surprised to find these elite brokers beginning to offer discounted services as well.
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