FAQs About Buying Stocks

By Bill Herrfeldt

  • Overview

    If you are about to buy stocks for the first time, you probably have questions about finding a stock broker, what types of stocks you should buy and what is the cost. Here are some answers to questions people have about their first investments in the stock market.
  • What Does Stock Brokerage Mean?

    Simply, the term, stock brokerage, means the matching of sellers and buyers of a particular stock. You cannot go directly to the New York Stock Exchange to buy your stocks. Instead, you need a broker who is a member of the exchange to do the transaction for you.
  • How Should I Choose A Stock Broker?

    First, ask your friends.They may have opinions as to whom you should use. Also, you need to compare what they charge. For example, some use traditional brokerage houses while others save money by buying stock online. Also, you need to learn about the different services that brokers offer, like banking services or research. Base your decision on your own needs.

  • What Should I Do Before I Contact a Stock Brokerage Company?

    Know how much you would like to invest and what kinds of stocks you are interested in buying. For instance, do you want to spread your risk by investing in mutual funds, or does a particular sector like cosmetics or supermarkets interest you? Both online and traditional brokerage companies require that you invest a minimum amount. Do your homework before you call.
  • What Is The Difference between Online and Traditional Stock Brokers?

    If you plan to do most of the research before choosing a particular stock, choose an online stock brokerage company because it will cost you significantly less than a traditional broker. On the other hand, if you want a broker to do the research for you and make recommendations, then a full-service stock brokerage company is a better choice. It will cost you more, per trade, than an online broker, but many people feel the added expense is with it.
  • How is the Price of a Stock Determined?

    Stock markets run like auctions, with sellers saying how much they want for a stock and buyers saying what they will pay for it. It is up to the brokerage firm to buy or sell a particular stock based on your directions.
  • How Fast Does a Transaction Take?

    If you are buying or selling a frequently traded stock, both online and traditional brokerage companies will "settle" the transaction on the fourth business day following your order. In rare instances, when the trade involves a stock that has few buyers or sellers, the process can take longer. Because the stock market moves so quickly, the price of the stock you buy or sell may be different from when your broker recommended it or when you placed the order online.
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