| Other than your job or career, the most | | | | commission. |
| important thing to you is your investments. And, | | | | A full-service broker, much like a full-service gas |
| unless you own your own business, your | | | | station, advises you on which stocks to buy. Full |
| investments are actually more important than | | | | service brokers are financial advisors, they tell |
| your career. Job security is not guaranteed, and | | | | you what to do. However, full-service brokers |
| unless you want to work until you are 80 years | | | | don't always provide expert advice. Most of the |
| old, you need to become familiar with the bare | | | | advice they provide is based on research done by |
| essentials of investing and financial planning. Your | | | | analysts who work for the brokerage house. |
| investments are the key to your future security. | | | | A discount broker is someone who gives you |
| So, we will cover some basics about stocks to | | | | zero advice, and just executes your market |
| get you started. | | | | orders for you, but does nothing else. Therefore, |
| Stocks are also know as equities because a share | | | | a discount broker usually doesn't collect |
| of stock is a certificate of ownership in a | | | | commissions. Instead, they usually charge a flat |
| corporation. It is also a claim on the earnings of | | | | annual fee and are paid a salary. Internet brokers |
| the corporation. Companies pay out a percentage | | | | such as Etrade or Ameritrade are discount |
| of their earnings to shareholders in the form of a | | | | brokers that work on commission. They allow you |
| dividend. | | | | to place your market orders online, and the |
| There are two different types of stock: common | | | | website itself is the broker. Internet brokers |
| stock and preferred stock. Common stock | | | | usually charge a much smaller commission than |
| represents ownership in a corporation. Holders of | | | | anyone else. |
| this type of security exercise control by electing a | | | | A full-service broker offers a wider array of |
| board of directors and voting on company policy. | | | | investment vehicles for you to put your money |
| Common stockholders are on the bottom of the | | | | in, such as stocks, bonds, derivatives, annuities, |
| priority ladder for ownership structure. In the | | | | and some also sell life insurance. A discount |
| event of liquidation, common shareholders have | | | | broker, on the other hand, doesn't have access to |
| rights to a company's assets only after | | | | all these investment vehicles. A discount broker |
| bondholders, preferred shareholders and other | | | | makes money by opening up a lot of accounts |
| debtholders have been paid in full. Preferred stock | | | | and having a lot of customers, but a full-service |
| has a higher claim on the assets and earnings than | | | | broker makes money by placing a lot of trades |
| common stock. Preferred stock has a dividend | | | | within your account, because they receive a |
| that must be paid out before dividends to | | | | commission on each trade. |
| common stockholders, but preferred stock often | | | | This is where you need to be careful. Full-service |
| has no voting rights attached to it. | | | | brokers make money every single time you place |
| Stocks trade on an exchange. The largest | | | | a trade. So, they have an incentive to persuade |
| exchanges where the best stocks trade are the | | | | you to place a lot of trades, because that's where |
| New York Stock Exchange, American Stock | | | | they make their money. There are unscrupulous |
| Exchange, and the NASDAQ. Within an exchange, | | | | full-service brokers out there who do provide |
| there is the primary and secondary market. The | | | | sagacious investment advice, but who are so |
| primary market is for the initial sale of shares in a | | | | active with your portfolio that their commissions |
| company for the first time to the public, as with | | | | start to eat away at your earnings. Neophyte |
| an IPO. The secondary market is for the trading | | | | investors have unknowingly hired these sorts of |
| of shares between individual investors. | | | | brokers, and when they get their annual |
| Now that you understand the basics, you need to | | | | statement they're shocked to find that they |
| learn how to actually buy a stock. When you buy | | | | made a lot less than what they thought, and in |
| or sell a stock, you must place the order through | | | | some cases actually got a negative return on |
| a broker, who then transacts your business by | | | | their investments. So, be careful when selecting |
| placing the order on the market. Stockbrokers | | | | your broker. |
| are basically salespeople. They work for | | | | I hope this information has helped you to get |
| brokerage houses. You've heard the names Merrill | | | | acquainted with stocks. Try to set aside some |
| Lynch, Solomon Smith Barney, Goldman Sachs. | | | | money for investing and start while you are still |
| Those are brokerage houses. Brokers work at | | | | young. The earlier you begin, the more money |
| those companies. Some brokers are paid a | | | | you can potentially make down the road. Carefully |
| straight salary, some are paid a commission, and | | | | research the companies you are going to invest in |
| some receive a base salary in addition to their | | | | and you will do fine. |