Question

In your own words, provide 3 methods of buying stocks, and explain the transaction in detail (provide information about the transaction, for example, if one of your methods is buying from an online platform, mention CFDs and explain what it is and how does the transaction works including the kind of commission or fees paid).

Answer 1

Stocks of a comapny is only available at one place,the stock exchange where it is listed.

Usually,you cannot buy the stock directly,instead you must ask someone who holds a federal securities license to buy it for you.

Following are the methods of buying stock

1.Through Brokerage Firms

Brokers at the major national brokerage firms can help investors to decide what stock to buy.They are paid commission when you buy and sell shares.The rate of commission is typically around 1.5% of investment amount.Unlike registered investment advisors who serve your best interest,commission based stockbrokers need adhere only to the lower legal standard that their recommendation be suitable and appropriate.

2.Discount brokers

If you know what you want to buy and all you need is someone to get it for you,you can save money by turning to discount broker,whose commission fees will be less.Discount brokers do not provide invetsment advice nor do they provide you with a specific representative.Instead,you will get a toll free phone number or a website for you to use when placing an order,like buying from catalog.

For above,you need to have a brokerage account.Opening an online brokerage account is as easy as opening of bank account.You have to complete an account application,provide proof of identification and choose how to fund the account.You may fund your account by mailing a check or transferring funds electronically.

3.Buying stocks without broker

There is only one way to buy stock without going through a licensed broker,and that is buying your shares directly from the company that offers the stock.For this you need to have a trading account.