Let's say I'd like to purchase some stock and I've never done it
before.  How do I begin?

1.  Do I need a stockbroker?
2.  How do I select a stockbroker?
3.  How does the broker get paid?
4.  If fees vary, how do I get a reasonable one?
5.  How do I pay for the stock?
6.  Is $5000 an okay starting investment?
7.  What else should I ask?

Thank you,
Apteryx

Hi! Thanks for the question.

I will try to answer your questions point-by-point so as to keep it
simple. I will provide you with the link that directly answers your
question.


1. Do I need a stockbroker?

You actually have a choice. You can buy stocks from brokers or from
DRIPs & DIPs (Dividend Reinvestment Plans ?DRIPs? and Direct
Investment Plans ?DIPs?)

?Stock Basics: Buying Stocks?
http://www.investopedia.com/university/stocks/stocks5.asp

?What does a Broker do??
http://www.investopedia.com/university/broker/broker.asp 

?What Are Dividend Reinvestment Plans??
http://www.fool.com/DRIPPort/WhatAreDRIPs.htm 

?How a Fool Can Invest in Drips?
http://www.fool.com/DRIPPort/HowToInvestDRIPs.htm 


----------------------------
2. How do I select a stockbroker?

Our next links provide tips on how should you choose your broker.

?10 Ways to Size Up a Broker?
http://www.fool.com/dbc/qa/qa02.htm 

?Brokers: The Costs?
http://www.investopedia.com/university/broker/broker1.asp 

?Full Service or Discount??
http://www.investopedia.com/university/broker/broker2.asp 

?Brokers: Choosing a Broker?
http://www.investopedia.com/university/broker/broker3.asp 


--------------------------
3. How does the broker get paid?

Brokers usually get paid through the commissions in your trade.
Discount brokers meanwhile also get extra earnings from the spread.

Broker - ?An agent that charges a fee or commission for executing buy
and sell orders submitted by an investor.?

?Stock Broker?
http://www.investopedia.com/terms/s/stockbroker.asp 


Discount Brokers ? ?You almost certainly are not the only one paying
your broker. They also receive payment from market makers and from
principals, who are just salivating at the prospect of making your
trade for you. Why? Because they can execute your trade at a less than
optimum price, and pocket the difference.?

?How Discount Is Your Discount Broker??
http://bbs.annex.com/investor/howdisco.htm


--------------------------------------
4. If fees vary, how do I get a reasonable one?

Our next links provide a discussion on how to choose among different
brokers based on services, fees and costs. The broker firms are ranked
as well.

?Choosing a Broker?
http://www.fool.com/dbc/dbc.htm?source=LN 

?Basic Discount Brokers ? Rankings?
http://www.smartmoney.com/brokers/index.cfm?story=2003-basic-table

?Premium Discount Brokers ? Rankings?
http://www.smartmoney.com/brokers/index.cfm?story=2003-premium-table 

?Full-Service Brokers ? Rankings?
http://www.smartmoney.com/brokers/index.cfm?story=2003-full-table 

 
-----------------------------------------
5. How do I pay for the stock?

This article provides the basics on what transactions to expect when
you buy and sell stocks.

?Buying Stock?
http://www.theonlineinvestor.com/knowledge_center.phtml?content=kc_buyingstock 


----------------------------------------
6. Is $5000 an okay starting investment?

Actually you can start for as low as $20 but it really depends up to
you on how much money will you be comfortable in investing in stocks.

?How To Invest $20, $100 and $1,000+?
http://www.fool.com/dbc/qa/qa03.htm 


-------------------------------------
7. What else should I ask?

The final few links provide some good questions you can ask your
broker before making your first trade with them.

?Step by step guide to investing in shares? (The questions are at the
bottom of the article) (This article is from Australia but the
questions are generic and can be applied to any situation)
http://moneymanager.smh.com.au/investing/guides/shares_guide.html 


?If you invest through an advisor, ask how much money the advisor
makes from the sale. If there?s no obvious sales charge, keep asking
questions until you understand how the advisor is compensated. If you
get only vague answers, take your business elsewhere.?

?Ask whether the advisor or his or her firm gets anything extra for
selling the product that?s being recommended to you. These extras
could include trips, golf tournaments or many other incentives.?

?Ask for names of some good alternatives. Your advisor should be
focused on defining your needs, then selecting various ways to meet
them and helping you sort through the options. If the broker pushes
hard to get you to invest in one particular thing, be sure you
understand why that is happening.?

?When Your Broker Might Not Really Be Your Friend (continued)?
http://www.fundadvice.com/FEhtml/InvestingBasics/0312b.html 

?How To Avoid Problems In The Future?
http://www.nasd.com/Investor/protection/complaints_avoidance.asp 


Search terms used:  
"stock market" newbies minimum investment
"what to ask" broker stocks
"How do brokers get paid?" stocks

I hope these links would help you in your research. Before rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
                             
Thanks for visiting us.                              
                              
Regards,                              
Easterangel-ga                              
Google Answers Researcher

---

Request for Answer Clarification by apteryx-ga on 29 Apr 2004 10:47 PDT

Hi there, Easterangel--thanks for taking my question!

By question 7, I meant what else should I ask *you*?  This means that
if there is some other question that would fit in with my beginning
education on this topic, but I don't have the wit to ask you, please
tell me what that question is (and then answer it).

For bonus points, could you please also explain what is meant by a
"managed account" (like the ones that require a minimum investment)
and help me judge the wisdom and risk of investing online in the way
that ghalysport's comment suggests.

Thank you,
Apteryx

---

Clarification of Answer by easterangel-ga on 29 Apr 2004 16:37 PDT

Hi!

Sorry about the misunderstanding at question #7. I feel that you have
covered enough ground about the broker aspect of investing. What you
didn't ask about (I presumed you already know) is about the stock
market itself.

1. What are the basics I should know about the stock market?

"What Is the Stock Market?"
http://www.factmonster.com/spot/stockmarket.html


2. Where can I go to research about the companies I want to buy?

Yahoo Finance is a good starting point for stock market research.

Yahoo Finance
http://finance.yahoo.com/


3. This link from Yahoo provides the questions and answers you need to
know about before you plunge your hard earned money at the stock
market.

"Learn the Basics about Stocks"
http://biz.yahoo.com/edu/ed_stock.html


---------------
Here is a good discussion about managed accounts.

"With a managed account, an investment advisor works with the client
to define the client's risk tolerance and long-term goals. Next, the
advisor assists the client in selecting one or more appropriate mixes
of managers whose styles and expertise meet the investor's investment
goals and objectives. Each manager selects stocks for a portion of the
client's investment portfolio, which it actively manages on an ongoing
basis."

"The minimum required investment varies, depending on the mix or
program guidelines."

"Managed Accounts"
http://www.russell.com/us/investment_products/managed_accounts/Managed_Accounts_Defined.asp


------------------
Online trading is good tool but keep in mind to only trade with
reputable broker firms. I found the following articles that provide
good discussions about the pros and cons of online trading.

"Stocks - Online Trading vs Use a Broker - Which is Best"
http://stocks.about.com/cs/onlinevsbroker/a/ol_vs_broker_p.htm

"Introduction to Online Trading"
http://www.tradetrek.com/education/introduction.asp


I hope these were of help to you.

Best Regards,
Easterangel-ga

Thanks, Easterangel, for your speedy and thorough coverage of this
topic.  I feel very well prepared now to take the plunge!

Apteryx

If you know what stock you want, just sign up with Ameritrade, ETrade,
or one of those companies...It is much easier than hassling with
brokers and such.

Thanks apteryx-ga for the 5 stars, the kind words and for the tip! :)

Some more tips to help you get started -- these are very basic
introductions, but that seems to be what you are seeking:

How to Buy Stocks
http://www.ehow.com/how_544_buy-stocks.html

How to Research Stocks to Buy
http://www.ehow.com/how_14738_research-stocks-buy.html

How to Use a Stockbroker
http://www.ehow.com/how_14736_stockbroker.html

How to Get Started Investing in the Stock Market
http://www.ehow.com/how_14752_started-investing-stock.html

I hope this helps!  Good luck, and consider starting with mutual
funds.  With $5,000 it might make sense just to begin buying an S&P
500 fund -- in effect, you'd own a little bit of 500 of the leading
companies in the US.

Because it will cost you $10-$20 to buy, and again to sell, if you
bought more than 2-3 stocks with your $5,000, you'd end up using too
much money on transaction fees, and it would be hard to get a return.

However with only 2-3 stocks you would not be very diversified -- your
returns could be very good, or very bad, but things would be very
risky for you.  Buy buying an S&P 500 (or other) index fund, you'd
have a stake in what happens to the whole US market (or a big piece of
it) -- a much safer bet. And the fees would be less.

I bought ETF -- exchange traded funds.  In essence, this is an easy
way to buy mutual funds just like you'd buy a stock.  Look for the
tickers SPY or IVV -- they're both stocks that represent a share in
the S&P 500.  IVV is about $100 a share now, so you could buy almost
50 of those.

good luck