Buy Stock
You’re smart to invest in stock!
The stock market is the wisest long-term investment. When you buy stock, you’re buying a small piece of a corporation – probably a public corporation, one in which anyone can purchase stock.
Stock is priced by the share; you can monitor the price of a share of the stock – that is, the share’s value – every day in the business section of the newspapers. When the price goes up, you’ve made money. When it falls, you’ve lost. It’s that simple.
But what stock to buy? If you have some inside knowledge about a company, or about an industry, you may be in a better position than other investors to predict the value of a stock. If you know that it looks like the stock will do well in the future, you’ll want to take advantage of your in-group expertise by buying a few shares. Call the corporation’s Investor Relations department and buy through its direct purchase plan. They’ll want a certain sum initially, and probably regular purchases through automatic withdrawals from your bank account as well.
However, not all companies have direct purchase plans. In this case, you might investigate to see if they offer a dividend reinvestment plan (DRP or DRIP). In a DRP plan, dividends from stock you already own are automatically reinvested in the company for you. Of course, you’ll need to own stock in the company in the first place for this option.
The advantage of buying stocks directly is that you save a broker’s fee. However, for nearly all of us, the best course is to buy through a broker/advisor, or a full-service broker, particularly if we’re thinking of investing substantial sums. There’s risk in all investments, and your broker will know where to place your money to minimize risk and maximize potential gain. There’s always a trade-off between risk and potential gain, and the balance can get very complicated. Your broker will know how to balance your stock portfolio; he’ll combine stocks in such a way as to minimize the overall risk you’re taking.
You don’t have the time to go to every stockholder’s meeting of a company, to monitor the company’s market, to anticipate the prices its providers are going charge. It’s the job of your broker to be in touch with the financial analysts who do this research. He’ll make them work for you.
However, you may enjoy doing the research needed to make wise investments. If you want to make investment decisions yourself and you want to consider all stocks – not just those with direct purchase plans – you’ll want a discount broker. He’ll honor your choices and handle the stock transactions for you at a lower commission than a full-service broker would charge.
Financial Stock:
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