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