Stock Investing For Dummies®, 3rd Edition

Chapter 7. Going for Brokers

In This Chapter

• Finding out what brokers do

• Comparing full-service and discount brokers

• Selecting a broker

• Exploring the types of brokerage accounts

• Evaluating the recommendations of brokers

When you're ready to dive in and start investing in stocks, you first have to choose a broker. It's kind of like buying a car: You can do all the research in the world and know exactly what kind of car you want, but you still need a venue to conduct the actual transaction. Similarly, when you want to buy stock, your task is to do all the research you can to select the company you want to invest in. Still, you need a broker to actually buy the stock, whether you buy over the phone or online. In this chapter, I introduce you to the intricacies of the investor/broker relationship.

For information on various types of orders you can place with a broker, such as market orders, stop-loss orders, and so on, flip to Chapter 18.

Defining the Broker's Role

The broker's primary role is to serve as the vehicle through which you either buy or sell stock. When I talk about brokers, I'm referring to companies such as Charles Schwab, Merrill Lynch, E*TRADE, and many other organizations that can buy stock on your behalf. Brokers can also be individuals who work for such firms. Although you can buy some stocks directly from the company that issues them (I discuss direct purchase plans in Chapter 19), to purchase most stocks, you still need a broker.

Note

The distinction between institutional ...