HOW TO BUY STOCKS ONLINE WITH FULL SERVICE BROKERS
If you are wondering how buying stocks works and the difference between full service brokers and discount brokers, you should know that they are quite different. If you decide to go with a full service broker, you will not be able to make your trades online by yourself. Your broker will make the trades for you and he will also make recommedations. There are two big differences between online stock brokers and full service stock brokers: the cost of the trades and the ability to buy stocks online.
Full service stock brokers employ stock analysts whose job it is to make stock recommendations to you. After depositing money, you will need to sit down with your broker (you can also do it over the phone) and discuss your investment goals. You need to tell him what time horizon you have for investing, whether you want to be agressive or conservative, whether you have any preferred industries you would like to invest in, and any other investment preferences you might have.
The job of your stock broker is then to make stock recommedations to you that match your investment criteria. He gets paid by commission and which is based on the business you do with him and so he will want you to make trades. A full service stock broker does not get paid based on the performance of the stocks he recommends and so this is something to be wary of. Once you and your broker decide on a stock purchase, they will make the trade for you and you can not do it yourself online. The cost of these trades will be substantially more than it would be online and that is because of the service they have provided of analyzing stocks and making recommendations to you.
If you want to learn how to buy stock online, you are going to have to do your own research and decide on your own what to buy. You have to do everything yourself from the research to the purchasing of the stocks. In exchange for giving you no personal service and no professional recommendations, you will be charged substantially less than you would with a full service broker. That is why the online brokers are called “discount” brokers.
If you are buying stocks with no experience and have the money, it can be an advantage for you to get the professional insight offered by a full service stock broker. Right now there are not many of them left and Merrill Lynch and Smith Barney are two of the biggest and well known. People with large dollars to invest often use these companies because they want the research insight that is provided and they value it over the cheaper form of online investing with no help. They then take the recommedations and pick the ones they like.
An investor can also do it the opposite way as well by doing research on their own and then asking the professional full service broker their opinion of the stocks in question. Experienced investors with money often like the ability to bounce investment ideas off the head of their broker and get much needed feedback. This is all more than any beginner investor would ever have the need for and so they usually go with the discount brokers when they decide to learn how to buy stocks online.
