Do you want to know how to buy stocks but don’t have an idea where to start or how? Don’t worry, you’re not alone and we’ll go over everything for you!
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We have all heard of the stock market, but most people actually know very little about it. For those who do really well in school and take finance classes early, they may learn more through experience instead of just reading a book or taking an online course.
The first thing to know is what kind of account you need. There are three main types of accounts that you can have to buy stocks.
The first type of account is a cash account, which is just like a standard bank account that has your hard-earned money in it. You can’t buy or sell anything with this account, you simply own it and make money off the interest (typically). There are some brokers who allow you to buy mutual funds or bonds with this type of account, but these assets don’t trade on exchanges like stocks do so they wouldn’t be a great way of gaining exposure to the stock market.
Next up we have discretionary accounts (aka managed accounts), which are accounts that you manage yourself, you make the decision what stocks and when to buy or sell. These discretionary accounts are generally fairly user friendly, but you will have to pay a commission every time that you buy or sell. The upside of this type of account is that you can make trades whenever you want and there are no fees for the transactions themselves. Often, they come with a simple smartphone app to enable you to keep an eye on your stocks and your portfolio value.
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Lastly there’s the non-discretionary account which means that your broker is going to pick out some investments for you according to the criteria that they set (usually it has to do with asset allocation). These accounts mean less input from you, so hassle free, but also you don’t get a say in what is bought or sold, and you have to pay a fee, often in the form of commissions that get taken from the earnings on the account.
In the UK and parts of Europe and Asia there is also one additional method of being involved in the stock market via spreadbetting or spread trading. This is a way to bet on whether your chosen stock or other tradeable asset will increase or decrease in value. Instead of commissions you pay the spread between the buy and sell price, and you can bet on margin therefore winning or losing far more than by buying the underlying stock as in the three account types detailed above
You should definitely do more research on your own so that you understand them better.
So, I hope that helps anyone who was interested in buying stocks online but needed some clarification on where to start.
This article is about buying stocks online as a beginner and details the different stocks trading account types available for doing so.
The author of this article does not constitute any of the details contained within this article or this website as financial advice and this should not be read or taken as such. You should therefore take specialist independent financial advice before buying any stocks or gambling on any stocks or other markets online.