The moment you think about stocks and investments, you think about stockbrokers. This is because it is the easiest and mostly the safest way of purchasing stocks on the stock market. There are many advantages of having a stockbroker, but there are also some distinct disadvantages. If you only have a little money to invest, most stockbrokers won’t take on your portfolio because it would be financially non-viable for both parties. Using a stockbroker also means that you have to pay commissions on transactions and these can become quite hefty.
Buying Stock
There are a few ways that you can buy stock on the stock market without having to go through a stockbroker. The first way is to open a brokerage account for yourself with the stock exchange from which you can then trade. What you need is some ready cash and a constant cash balance in the brokerage account. From then on you will be allowed to buy and sell shares as if you’re a broker. The only difference is that you will not be allowed to act on behalf of other people.
Another way of obtaining stocks is by buying them directly from the company. Many large corporations have stocks ready for sale to members of the public without involving stockbrokers. Usually you need to put down a start-up deposit, but if you intend to invest on a monthly basis and sign a debit order to that effect, the companies will agree to more favorable terms.
DRIP
The third way of participating in the stock exchange is by enrolling in a DRIP (Dividends Reinvestment Program). This is a way of keeping onto your stock, enlarging your portfolio and having your money make more money sooner. It works by using your dividends to buy more stock instead of paying out the money into your banking account. One condition of this way of purchasing stocks is that most of the companies that offer DRIPs require you to own at least one share of the company before you can enroll for the program. This is easy enough to do. There are many companies that will sell one share to a member of the public. Once you have the share, you can enroll in the DRIP within a few minutes and your money can start earning money for you.
Making the Decision
It isn’t easy to make this kind of decision – especially if you’re a first-time investor or inexperienced in trading stock. Perhaps you can use a stockbroker as a starting point and, as you gain confidence in your stock trading abilities, you can then take over your portfolio and be your own broker.
Money matters are extremely important in today’s economy. The fluctuations in exchange rates, foreign influences and political and social issues can jeopardize your financial well-being. This is why you invest in stocks. If you don’t have to pay commissions you have a much better deal.
