“Stock” is an investment indicating ownership in a corporation and a claim on some of that corporation’s assets and earnings. Ownership is calculated by comparing the owner’s stock shares to the corporation’s total number of outstanding shares. For example, an owner of 1 share would own 1% of a corporation having 100 outstanding shares, .01% of a corporation having 1,000 outstanding shares, and a miniscule % of a corporation like Microsoft because that corporation has 35+ million shares of outstanding stock. Two principal types of stock are “common stock” and “preferred stock.” Common stock normally entitles the owner to receive dividends and to vote at shareholders’ meetings. Preferred stock normally has a stronger claim on assets and earnings but no voting rights. Stock in one or more corporations is a typical facet of financial portfolios.
Stock is such a common investment vehicle that it can be purchased in one of several ways.
First, stock can be purchased directly from a corporation through a Direct Stock Purchase Plan (DSPP), which allows you to buy stock from a corporation with no commission/service charge or a very low commission/service charge. Many major corporations, such as ExxonMobile, Procter & Gamble and Coca Cola, will sell stock in this manner through a transfer agent. One of the world’s many transfer agents is Computershare, which allows you to set up an investment account, fund it, find a corporation that sells stock directly, and purchase the stock here: Computershare
Secondly, stock can be purchased directly from a corporation through a Dividend Reinvestment Plan (DRIP), which allows owners of stock in a corporation to reinvest their stock dividends by buying even more stock in that corporation, again with little or no commission/service charge. If a corporation allows DRIP, after you purchase stock through a Direct Stock Purchase Plan or otherwise, you can keep automatically purchasing stock in that same corporation by registering for that plan. You can find corporations allowing DRIP at the same Computershare link here: Computershareor through www.DRIPInvestor.com for two examples.
Third, stock can be purchased directly from a corporation through an Employee Stock Purchase Plan (ESPP), which allows employees of publicly traded companies to buy their own company’s stock for less than its market value, often through deductions from their salaries with placement of stock into the employee’s retirement fund. This plan must be individually reviewed with the employee’s own corporation. Buying stock directly from corporations allows you to avoid “the middleman” broker and the related commissions/fees.
Stock can also be purchased with the assistance of a stock broker, a professional buyer and seller of stock (along with other securities), who charges commissions and other fees for his/her services. Use of a stock broker requires the establishment, funding and maintenance of a brokerage account through cash and/or other securities. There are several types of stock brokers.
Fourth, you can use an online/discount broker, which is the cheapest, simplest way to purchase stock through a broker because you are making all the decisions with no brokerage advice. Online/discount brokers include but are not limited to: Etrade, found here: https://us.etrade.com/home TD Ameritrade, found here: https://www.tdameritrade.com/retirement-home.page and ScottTrade, found here: https://www.scottrade.com/Online/discount brokers have minimum required deposits (sometimes as low as $500.00), may charge you a maintenance fee, may charge you per trade (often $7 – $10), and may limit the frequency of trades. Each site will provide those specifics for you.
Fifth, you can use an online/discount broker with assistance, which add the help of an online broker for investing your money for a fee. Etrade, found here: https://us.etrade.com/home TD Ameritrade, found here: https://www.tdameritrade.com/retirement-home.page and ScottTrade, found here: https://www.scottrade.com/ all offer assistance for a fee.
Sixth, you can use one of many full-service stockbrokers, who often operate face-to-face and online. There are many full-service stockbrokers, including but not limited to: Morgan Stanley – https://www.morganstanleyclientserv.com/Charles Schwab – https://www.schwab.com/ and Fidelity – https://www.fidelity.com/ This option is more expensive, including commissions and other fees, because you are using the expertise and time of a professional who can assist you with many or all of your financial needs, including but not limited to stock trades.
Seventh, you can use a money manager or financial planner, who is a financial professional managing money for people with relatively large incomes and relatively large minimum account holdings. There are hundreds of money managers/financial planners operating in the U. S., including but not limited to the top-ranked: Blackrock, State Street Global Advisers, Allianz Asset Management, Vanguard Group and Fidelity Investments, all of which maintain web sites.
Eighth, Whatever option is used, you should “keep your finger on the stock pulse” using real-time market value through such services as: Yahoo! Finance, found here: http://finance.yahoo.com/ Google Finance, found here:http://www.google.com/finance/stockscreener and MoneyCNN, found here: http://money.cnn.com/data/us_markets/?iid=MKT_Sub As you can see from all these options, there are stock purchase opportunities for investors ranging from the very small to the very wealthy.
DO’S AND DON’TS
DON’T be intimidated by the process or the people.
DO purchase stock directly from a corporation through a Direct Stock Purchase Plan (DSPP), which can be found here:Computershare
DO purchase stock directly from a corporation through an Employee Stock Purchase Plan (ESPP), which can be individually reviewed with the employee’s own corporation.
DO use an online/discount broker with assistance, such as:
a. Etrade – https://us.etrade.com/home
b. TD Ameritrade – https://www.tdameritrade.com/retirement-home.page
c. ScottTrade – https://www.scottrade.com/
DO use a money manager or financial planner such as:
b. State Street Global Advisers
c. Allianz Asset Management
d. Vanguard Group
e. Fidelity Investments
DO “keep your finger on the stock pulse” using real-time market value through such services as:
a. Yahoo! Finance – http://finance.yahoo.com/
b. Google Finance – http://www.google.com/finance/stockscreener
c. MoneyCNN – http://money.cnn.com/data/us_markets/?iid=MKT_Sub
[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information cannot be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, or any of its affiliates, shall have any liability stemming from this article.]