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