Stock Basics: Buying Stocks

You've now learned what a stock is and a little bit about the principles behind the stock market, but how do you actually go about buying stocks? Thankfully you don't have to go down into the trading pit yelling and screaming your order. There are two main ways to purchase stock:

1. Using a Brokerage

The most common method to buy stocks is to use a brokerage. Brokerages come in two different flavors. Full-service brokerages offer you (supposedly) expert advice and can manage your account but also charge a lot. Discount brokerages offer little in the way of personal attention but are much cheaper.

At one time, only the wealthy could afford a broker since only the expensive, full-service brokers were available. With the Internet came the explosion of online discount brokers. Because of them nearly anybody can now afford to invest in the market.

We've actually got a whole separate tutorial on brokers and online trading, and you can check it out here.

2. DRIPs & DIPs

Dividend Reinvestment Plans (DRIPs) and Direct Investment Plans (DIPs) are plans with which individual companies, for a minimal cost, allow shareholders to purchase stock directly from the company. Drips are a great way to invest small amounts of money at regular intervals.