A share of stock is fundamentally a small piece of a corporation. People who buy stock – shareholders – are investing in the future of a company for providing that they own their shares. According to economic conditions, investors’ attitudes and the performance of the company – the price of a share varies. The 1st time a company provides its stock for public sale is called an initial public offering which is also called – going public.
It can split that money with its stockholders by providing a dividend when a business makes a profit. Also, a business can save its profit or by hiring new people or by making progresses to the business – it can re-invest it. Income stocks are stocks that issue common dividends. Growth stocks are stocks in companies that re-invest their profits.
Brokers sell and buy stocks through an exchange, and by charging a commission to do so. A person who is licensed to trade stocks through the exchange is simply a broker. A broker can make trades electronically or by phone or can be on the trading floor.
An exchange is like a warehouse in which people sell and buy stocks. A computer or person must match every sell order to a buy order, and the other way around. Some exchanges work as auctions on an actual trading floor, and others match electronically buyers to sellers. Some examples of major stock exchanges are:
- An electronic stock exchange – The NASDAQ.
- Trades stocks auction-style on a trading floor – The New York Stock Exchange.
- A Japanese stock exchange – The Tokyo Stock Exchange.
International Stock Exchanges has a list of main exchanges. OTC – Over-the-counter stocks are not planned on a main exchange, and you can search for information on them at the Over-the-counter Bulletin Board.
When you sell and buy stocks online, you are using an online broker that mainly takes the place of a human broker. The thing is that you still use real money, but rather than talking to someone about investments, you make a decision which stocks to sell and buy, and you request your trades yourself. Also, some online brokerages provide advice from broker-assisted trades and live brokers as part of their service.
You are going to need to choose a firm that offers that service if you need a broker in order to help you with your trades. Now, let’s take a look at other qualities for in an online brokerage next.
Choosing a Broker
You have to select an online broker before you can trade stocks online. Your online broker will perform your trades and store your money and stock in an account. There are still many firms to choose from although the online trading industry has seen lots of acquisitions and mergers. Also, different firms offer different account types, levels of help and other services. Here are some things you should bear in mind as you look for a broker.
- How often you plan to make trades.
- How much money you will invest.
- How much guidance you need and your level of trading experience.
- Any other services you may want.