Buy Shares of Stock

Why Buy Shares of Stock?

Most people buy shares of stock as an investment. They are looking to take the money that they already have and turn it into more by essentially loaning it to companies that they believe will perform well, and will pay good returns on their investments. Others buy shares of stock aggressively and in large quantities to gain influence and control in companies. Still others buy stock as a shares to experiment and learn the ropes of investing in hopes of greater success in the future.

While buying shares in a company can produce good financial returns and create wealth for the investor, many times the investor loses money because they react to uninformed tips and fail to do complete research and analysis. Even with complete research and analysis it is important to understand that losing money investing and buying shares of stock is still a possibility. Therefore, remember to never risk more than you can afford to lose.

Buy Shares of Stock Through a Broker

Pros: One of the most sensible ways to buy shares of stock is through a stock broker. Stock brokers are financial advisers educated and licensed to sell stocks, bonds, and securities. You can find stock brokers at most financial advising offices, or other commercial firms such as Charles Schwab, Prudential, Fidelity, or Merril Lynch to name just a few of the many. In addition to being able to buy the shares for you, stock brokers are also able to provide advice and assistance with the research and analysis so that you can make a well informed decision about where you decide to place your money.

Cons: The major downside to using a personal financial advisor and stock broker for buying shares is that it is definitely the most expensive option. Due to the level of education and assistance that the broker's provide, they are able to command a high commission for any purchases and sale of stock. This means that the amount of return on investments needs to be substantial in order to turn a modest profit.

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Buy Shares of Stock Through an Online Broker

Pros: Buying shares of stock is just one of the many things that people are now able to do themselves via the internet. Buying shares over the internet allows the investor to be more independent and in control of their investment strategy. The amount of money needed to open an account at an online brokerage is much less than opening one with a brick and mortar brokerage. To open an investment account online some places only require $500. The commissions paid to online brokerages are much less as well. Some places charge around $13 per trade, while Scottrade charges $7 per trade. A few "discount brokerages" have popped up as well and charge as much as $3 per trade (SOGOtrade) all the way down to $0 per trade (Zecco - a $25,000 minimum account balance is needed however). Many online trading websites also offer higher returns on their savings accounts.

Cons: While taking control of your own money is a pro, it is also something that has the potential to be dangerous. Having control over where you invest places a larger amount of responsibility and risk on you the investor. To reiterate what I said in the beginning, never risk what you cannot afford to lose. It is generally a good idea to make sure that the money you invest is money other than what you have in savings. In the event that the market goes sour, or a company you invested in takes a dive you will have more money in reserve in the case that you run into personal financial provlems as well.

Buy Shares of Stock Directly

Pros: If you hate the idea of having to pay commissions on the shares you buy or sell, then buying shares directly from companies might be just the right thing. A few companies such as Exxon, AT&T, and Abbot Labs all have direct stock purchase plans. Buying shares directly from a company completely cuts out the middle man and makes share ownership more personal and perhaps more meaningful.

Cons: The main drawback to doing direct stock purchases is limited selection of companies to invest in. The other main drawback is the amount of time it takes to finalize purchases and sales of shares. The process could take a few days, while buying and selling online is instantaneous.

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Practice Buying Shares of Stock

If buying and selling shares of stock sounds like a good way to make a few extra dollars or invest for the future, but you are not even sure where to start there are a few resources which can help you out. A few products and books have been listed here on this page, and a few helpful websites are listed in the box to the right.

The websites top the right are stock trading platforms which give you about $100,000 in fake money to play around with and invest with. Investing with fake money is a great learning experience and if you happen to lose it has no effect on your personal bank account. If you happen to get really good at investing with the fake money, there is the possibility to win up to $25,000 in real cash and other great prizes.