In order to buy stocks, you need the assistance of a stockbroker who is licensed to purchase securities on your behalf. However, before you go looking in telephone or online directories for your nearest broker-dealer, you need to figure out what type of stockbroker is right for you.
There are four basic categories of stockbrokers available today, ranging from cheap and simple order-takers to the more expensive brokers who provide full-service, in-depth financial analysis, advice and recommendations: online/discount brokers, discount brokers with assistance, full-service brokers or money managers.
Online/discount brokers are basically just order-takers and provide the least expensive way to start investing since there is typically no office to visit and no certified financial planners or advisors to help you. The only interaction with an online broker is over the phone or via the internet. Cost is usually based on a per transaction or per share basis, allowing you to open an account with relatively little money. An account with an online broker allows you to buy and sell stocks/options instantly with just a few clicks. Since these types of brokers provide absolutely no investment advice, stock tips or any type of investment recommendations, you’re on your own. The only assistance you’ll get is technical support for the online trading system. However, online brokers typically offer investment-related website links, research and resources but these are usually third-party providers. If you feel you are knowledgeable enough to take on the responsibilities of directing your own investments or if you want to learn how to invest without making a large financial commitment, this is the way to go.