| Most of the buying and selling on the stock market is | | | | whenever your account balance falls below a |
| handled by stock brokers on behalf of their clients, | | | | minimum. |
| who are the investors. Many different types of | | | | Cash Or Margin? |
| brokerage services are available. | | | | Brokerage accounts come in 2 basic types. The "cash |
| Full-Service Brokers | | | | account" offers no credit; when you buy, you pay |
| "Full-service brokers" offer a variety of ways to help | | | | the full stock price. With a "margin account," on the |
| clients meet their investment goals. These brokers | | | | other hand, you can buy stock on margin, meaning |
| can give advice about which stocks to buy and sell, | | | | the brokerage will carry some of the cost. The |
| and often have large research departments that | | | | amount of margin varies from broker to broker, but |
| analyze market trends and predict stock movements, | | | | the margin must be covered by the value of the |
| for their clients. | | | | client's portfolio. |
| Such services are not free, of course. Full-service | | | | Any time a portfolio falls below a specified value, the |
| brokers charge the highest commission rates in the | | | | investor will have to add funds or sell some stock. A |
| industry. Your decision whether to use a full-service | | | | greater opportunity exists for realizing gains (and |
| broker will depend on your level of self-confidence, | | | | losses) with margin accounts, because they allow |
| your knowledge of the stock market, and the | | | | investors to buy more stock with less cash. Involving |
| number of trades you make regularly. | | | | greater risk than cash accounts, as they do, margin |
| Discount Brokers | | | | accounts are not recommended for inexperienced |
| Investors who wish to save on commission fees | | | | traders. |
| generally use discount brokers. Brokers in this | | | | Selecting The Right Broker For You |
| category charge much lower commissions, but they | | | | You should carefully consider your needs as an |
| don't offer advice or analysis. Investors who prefer | | | | investor before making the choice of a broker. Do |
| to make their own trading decisions, and those who | | | | you wish to receive advice about which stocks to |
| trade often rely on discount brokers for their | | | | buy? Are you uncomfortable making trades on the |
| transactions. | | | | Internet? If so, you will be best served by a |
| Online Brokers | | | | full-service broker. If you are comfortable buying on |
| Taking the discount concept 1 step further, online | | | | the Internet, and you have the knowledge and |
| brokers are the least expensive way to trade stocks. | | | | confidence to make your own trading decisions, then |
| Both full-service and discount brokers usually offer | | | | you will be better off with an online discount broker. |
| discounts for orders placed online. Some brokers | | | | After deciding which type of broker you want, do |
| operate exclusively online, and they offer the best | | | | some comparison-shopping between competitors. |
| rates of all. | | | | Significant cost differences can show up when you |
| Account Requirements | | | | factor in all the annual fees and brokerage rates. |
| Whichever type of broker you choose, your first | | | | Estimate how many trades you expect to make in a |
| order of business will be to open an account. Minimum | | | | year, how much cash you can deposit into your |
| balance requirements vary among brokers, but it is | | | | account, whether you want to use margin accounts, |
| usually between $500 and $1000. If you're shopping | | | | and which services you need. Armed with this |
| for a broker, read the fine print about all the fees | | | | information, you'll be prepared to compare your |
| involved. You'll find that some brokers charge an | | | | actual costs for various brokers, and to make an |
| annual maintenance fee while others charge fees | | | | educated choice. |