When you start accumulating savings and you manage to spend less than you earn regularly, you should start to think about making your money work for you. One way to have your money work for you is to buy stocks. It can, however, be intimidating to start buying stocks and learning how. Owning a stock is not actually difficult and I’ll show you the different ways you can buy stocks. The research of a stock to buy is a different topic altogether
Most investors would rather have third party financial institutions or websites trade on their behalf than do it themselves and it is easy to see why. They need more than a little guidance concerning how the stock market works and investment services that know the ins and outs of affective trading offer them a reprieve.
Investors usually choose to buy stocks using one of the following ways. With any forms of purchase, you will also have to setup the proper accounts that work for you.
Through a Discount Broker
If you want to invest in stocks on your own, settling for a discount broker might be the best course of action. Discount brokers act as middle men who act on your behalf on the trading floor by buying and selling stock or conducting option trades.
Once you have decided on your online brokerage firm the next step would be to set up an account with a deposit and appropriate tax forms. As a new user, you can now begin buying stocks online. It’s best that you do your research before giving your discount broker the go ahead to act on your behalf. As an investor, you can either go with a plan or a onetime order.
A one time order will require an investor to inform his broker the about number of shares that he wishes to purchase. Plans involve regular investments in a portfolio. Some online discount brokers charge investors a monthly fee for it. This also includes the cost of weekly trades. It works like this; investors determine the amount of cash that they wish to invest each week and the type of investments that they prefer while their brokers do the rest.
Related: Choosing the best Discount Broker
Through a Transfer Agent
Unlike discount brokers, transfer agents might require you to open separate accounts for each stock. Once you prompt your transfer agent to sell they will sell it at whatever price the stock happens to be in when the order is processed. The type of transfer agent you choose may be an online trust company, bank or financial institution that is tasked with maintaining records of investors and account balances, cancel or issue certificates, process investor mailings or anything else.
Computershare is a good example. The website provides investors with updated information about holdings and transaction tools. It allows shareholders to buy shares through a direct investment plan, vote online and sell their shares as either market orders or batches.
Related: Easy Investing With Computershare
This is the best way to get your children started with investing. Imaging having your kids owning shares starting at 10 years old, wouldn’t they have 10 or even 20 years of compound growth working for them?
Related: How To Transfer Shares To Your Kids
Through a Portfolio Manager
A portfolio manager is an individual or persons who are responsible for making investment decisions by using the funds that other people have given under their control. They are also known as persons who are ultimately responsible for coming up with investment strategies, selecting suitable investments and allotting each of them for an asset management vehicle or fund.
How do you buy stock through a portfolio manager? The process starts by the portfolio manager understanding the needs of the investors like their risk preferences or tax status.
- The next step is constructing the portfolio. The first decision would involve apportioning the portfolio across different classes of assets or equities, real assets like commodities and fixed income securities.
- The next step would be would be the selection of assets. This would mean selecting the stocks that will make up the equity component, the real assets that would make their respective component and the bonds that would go in the fixed income component.
- The final step would be the execution in which the final form of the portfolio will take shape. In order to trade quickly investors must weigh the cost of trading against their perceived needs.
In many cases, portfolio manager, also known as wealth manager, have minimum requirements for portfolio sizes to be considered a client.
Remember, buying stock can be a tricky prospect especially if you have never traded before and don’t know how the stock market works. Take your time and seek professional advice along the way.
Readers: Which one works for you?