With online brokerages popping up all over the internet, many investors have begun to question the need for the traditional brokerages. Why go to a professional, pay their fees and give them my money to invest when I can just do it myself?
If you are asking yourself this question, just stop right there. Yes, there are many opportunities for you to trade stocks by yourself online but there are many benefits that come along with having a professional company take care of your investments.
First, let’s take a look at exactly what a brokerage firm is and what they do. A brokerage firm acts as the intermediary between a purchaser and a seller.
Simply put, this means that the brokerage firm is the in-between man that is between the sellers and the purchaser. The broker is the man or woman that communicates with both the buyer and the seller as to an acceptable price on anything that is sold or purchased.
The broker or the brokerage firm will complete all of the necessary legal paperwork. At times this paper work can be overwhelming to someone that has not been trained in the trade.
After this step the professionals will then obtain all of the appropriate and necessary signatures. Finally they will collect money from the purchaser and give it to the seller.
At this point they usually takes a portion of the money from the deal because they were hired by either the buyer or the seller. The buyer and the seller still make money from the deal, but some people do not like the fact that they do not get all of the money from the deal.
The fees that brokerages charge can differ drastically. Much of it depends on the involvement level in decisions about the purchase.
There are investors that give their firms power of attorney. By signing over this power to a brokerage firm you are giving the firm the power to make decisions with your money in your name.
In these cases the brokerage fee is usually fairly high. Whether the investor loses money or makes money the fee will be paid.
This is another aspect of hiring a brokerage firms that turns a lot of people off. This is a very personal decision.
If you do not have the time or the resources to do extensive research about the stocks you want to invest in, then the fee you pay would be worth it. There are brokerages that charge per transaction.
If you decide to go with a brokerage that charges per transaction you will usually find a firm employed by people who like to do their own research and make all of their own decisions about when to buy and sell.
These firms are a much more reasonable option for many. Employing them may cost less, and in the majority of situations the results will be very much alike.
It is companies like this that often times will provide an online trading option for their clients. This process has a very minimal per transaction fee, but requires an investor with a lot of knowledge about the stock market.
If you are looking to learn how to invest your stocks on your own, there are many programs out there that will teach you the ins and outs of the stock market.
Educating yourself about the stock market is necessary if you want to be successful in investing your own stocks. There are many different ways that you can go about educating yourself.
Taking a finance class at a community college is a great option. Most colleges will provide a personal finance class that can help you better understand how to wisely invest your money.
It would also be useful to take an entry level economics class. These classes will teach you how the stock market works and how our economy in general works.
This knowledge may drive you to invest your money in something completely different than stocks. There are many investment options out there and it is important to keep your mind and eyes open to the other options.
There are also companies that have created programs to help educate people about the trends of the stock market and how to invest your money in a lucrative way. These different coaching companies will walk you through the steps of investing.
Whether you choose to utilize a brokerage or you decide to learn the stock market on your own, the stock market can provide a great investment opportunity for you.
Jack R. Landry has worked in financial services for the last 12 years and written hundreds of articles about investing and Optioneer Trading.
Jack R. Landry
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