Do I Need A Broker To Buy Stock – To buy stocks, you will usually need the assistance of a stock broker because you cannot simply call up a stock exchange and ask to buy stocks directly. When you use a stock broker, whether in person or an online platform, you can choose how to handle the investments and trades you want to buy or sell.
In this vein, there are two broad categories of brokers to choose from: a full-service broker or an online/discount broker. Below, we discuss how you can use these options to trade your own stocks.
Do I Need A Broker To Buy Stock
We’ll also talk about a third option: Direct Stock Purchase Plans (DSPP), through which investors can acquire shares directly from certain public companies. It lets you buy stocks online without a broker; However, this option is limited in its usefulness as you have to maintain DSPPs for each company you own stock in instead of keeping your entire portfolio in one place. Moreover, many online brokers today offer commission-free stock trading, making it an easier and more cost-effective option.
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Most often, stocks are listed and traded on exchanges, licensed venues where buyers and sellers meet, often with the help of brokers or other intermediaries. These intermediaries will be members of the exchange and will use their access to buy and sell shares on your behalf. Major exchanges in the United States include the New York Stock Exchange (NYSE) and the Nasdaq Market.
Smaller companies (sometimes called penny stocks) with less liquid shares and smaller market caps can alternatively trade over-the-counter (OTC) on more loosely regulated platforms such as OTC Pink Sheets. Shares of these companies are often more volatile and risky, so investors choosing to trade in the OTC market should do extra due diligence and understand the risks involved.
Full-service brokers are what some people imagine when they think about investing – well-dressed professionals sitting in an office and chatting with clients. These are traditional stock brokers who will take the time to get to know you personally and financially.
They will look at factors such as marital status, lifestyle, personality, risk tolerance, age (time horizon), income, assets, debts and more. By learning as much as possible about you, these full-service brokers can help you develop a long-term financial plan.
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These brokers can help you not only with your investment needs, but also with estate planning, tax advice, retirement planning, budgeting, and any other type of financial advice—hence the term “full service.” They can help you manage all your financial needs now and in the future and are for investors who want everything in one package.
In terms of fees, full-service brokers are more expensive than discount brokers, but the value of having a professional human investment advisor on your side can be worth the extra cost. Today accounts can be set up for as little as $1,000. Most people, especially beginners, fall into this category depending on the type of broker they need.
Those who want a set-and-forget approach to investing but don’t have the money or time to hire a full-service broker can opt for a roboadvisor. These are algorithmic investment platforms that you can manage through an app or website for a fraction of the cost of a traditional financial advisor.
Online/discount brokers, on the other hand, do not offer any investment advice and are basically just order takers. They are much less expensive than full-service brokers, as there is typically no office to visit and no certified investment advisors to assist you. Pricing is usually based on a per-transaction basis, and you can usually open an account on the Internet with little or no money down. Once you have an account with an online broker, you can usually just log into their website and your account and start buying and selling stocks right away.
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Note that since this type of broker does not provide any investment advice, stock tips or any other type of investment assistance, you are on your own to manage your investments. The only help you usually get is technical support. Online (discount) brokers offer investment-related links, research and resources that may be helpful. If you think you are savvy enough to take on the responsibilities of managing your own investments, or if you know nothing about investing but want to teach yourself, this is the way to go.
The bottom line is that your choice of broker should be based on your personal needs. Full-service brokers are great for those who are willing to pay a premium for someone else to handle their finances. Online/discount brokers, on the other hand, are great for people with little start-up money and who want to take on the risks and rewards of investing on their own, without any professional help.
Sometimes, companies (often blue-chip companies) sponsor a special type of program called a Direct Stock Purchase Plan (DSPP). DSPPs were conceived generations ago as a way for businesses to let small investors buy ownership directly from the company. Participating in a DSPP requires an investor to be affiliated directly with a company rather than a broker, but each company’s system for administering a DSPP is unique.
Participating companies will offer their DSPP through a transfer agent or other third-party administrator. To learn more about how to participate in the Company’s DSPP, an Investor should contact the Company’s Investor Relations Department.
How To Buy Stocks
Once you’ve chosen your brokerage platform, you’ll need to set up and fund an account before you can start trading. Today, it’s easier than ever to link a bank account online and transfer funds or electronically roll over an existing brokerage account to another firm. You can also choose to make recurring deposits in your brokerage account to grow your portfolio on a regular basis.
Once funded, all you need to do is go online or call your broker to place a trade. Stocks are designated by a unique ticker symbol, a one- to four-letter mnemonic assigned to a particular company. MSFT, for example, Microsoft Inc. is the ticker for, and AAPL stands for Apple Inc. is the ticker for If you don’t know your stock’s ticker, it’s easy to find online or through your broker.
When you select the stock ticker you want to trade, you will get a set of information about the price quote, stock price and activity. It will show you the last price at which the shares traded, as well as bids and offers. The bid is the highest price at which someone in the market will buy the share (and thus the best price you can sell it to). The offer, or ask, is the lowest price at which someone in the market is willing to sell (and thus, the best price at which you can buy from them). The difference between the bid and offer prices is known as the spread. A narrow spread usually indicates that the market for a stock is quite active and liquid. A wide spread indicates the opposite. After considering the price, you can place your order.
A market order is the most basic type of order and will get you immediate execution at the prevailing market price. On the other hand, a limit order allows you to set a specific price at which to buy or sell. If the price never reaches that limit, the trade will remain active until it is cancelled. Many such trades are day orders that remain good until the end of the trading day. If you wish to activate the order for a certain period of time, you can specify Immediate Or Cancel (IOC) to your broker instead. Alternatively, if you want the order to remain in effect for more than one day, you can designate it as Good Until Cancel (GTC). Other conditions may also be placed on the order, such as a stop-loss.
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Once your trade is executed (in whole or in part), you will receive a payment—a summary of your order details.
You must be at least 18 years of age in the United States to open a brokerage account and trade shares. For a person under the age of 18, a parent can set up a custodial account on their behalf.
Yes Many online brokerage platforms (such as Robinhood) offer commission-free trading in most stocks and exchange-traded funds (ETFs). Note that these brokers still make money from your trades, but by selling order flow to financial firms and lending your stock to short-sellers.
The easiest way to complete a trade is to open an online account and fund and place market orders. While this is the fastest way to buy stocks, it may not always be the wisest. Do your own research before deciding what type of order to place and with whom.
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Generally you need to open an account with a broker to buy and sell stocks online. Some publicly traded companies, however, offer direct stock purchases
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