Investors
most commonly buy and trade stock through brokers.
You can set
up an account by depositing cash or stocks in a brokerage account. Firms like
Charles Schwab and Citigroup’s Smith Barney unit offer brokerage accounts that
can be managed online or with a broker in person. If you prefer buying and
selling stocks online, you can use sites like E-Trade or Ameritrade. Those are
just two of the most well-known electronic brokerages, but many large firms
have online options as well.
Once you
open an account you will tell your broker how many and what types of stocks
you’d like to purchase. The broker executes the trade on the your behalf. In
turn, he or she earns a commission, normally several cents per share. Online
trading sites typically charge lower commission fees, because most of the
trading is done electronically.
After
selecting the stocks that you want to purchase, you can either make a “market
order” or a “limit order.” A market order is one in which you request a stock
purchase at the prevailing market price. A limit order is when you request to
buy a stock at a limited price. For example, if you want to buy stock in Dell
at $60 a share, and the stock is currently trading at $70, then the broker
would wait to acquire the shares until the price meets your limit.
While
purchasing stocks through a broker has its advantages, there are other ways to
buy stock. You can purchase stocks directly through the company. Sites like
DRIPInvestor.com will show a list of companies that allow direct-buy of stocks.
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