Stock Brokers for Beginners

So you've made the decision to start investing in stocks, money is burning a hole in your wallet, and you're itching to get started.  In your mind's eye, you see a version of you dressed in a power suit elbowing your way through a room filled with financial types waving your fists in the air and shouting to "sell, sell, sell!"

Before you dash off to Wall Street, take a few more minutes here in front of your computer (dressed in your pjs and bunny slippers), and consider the types of stock brokers out there who can assist you with your leap into the world of investing in stocks.

They want how much?

Take heart.  Buying stocks with the assistance of a broker does not have to cost your life savings plus your first born; there are stock brokers out there who are a good fit for the budget-minded.  Often referred to as discount or online brokers, these brokers often fill a basic order-taking function over the internet.  They'll usually provide minimal assistance and little to no guidance on what to buy, but their costs are typically per transaction and overall pretty low.  Plus, using the internet, transactions can be made almost instantly with the click of a mouse.  Keep in mind, you'll have to do some research about which stocks you'd like to buy.  This might be a good way to go if you're looking to get your feet wet in buying stocks without throwing a lot of money around. 

But I need some one-on-one time

Traditional stock brokers, or full-service stock brokers, can give you this.  Often, they're available to sit down with you and review your personal situation, taking into consideration factors such as marital status, income, debts, age, and so on.  They can give you guidance based on their expertise on what stocks might be a good purchase for you, and ultimately can help form a personalized financial plan. 

If you like them and want them to stick around for the long haul, usually they are happy to oblige.  Of course, this will come with a heftier price tag than the point-and-click variety of brokers described above.  However, the additional costs may be worth it for you if you value someone working with and for you regarding your best financial interests.

Another important trend to mention: as online investing and big-name brokerages become more and more prevalent, people are turning to financial planners more than experts who deal solely in stocks. Financial planners are an expanded version of a full-service broker, and can talk you through all sorts of investments, helping you to diversify your portfolio in a way that makes sense for you.

How to decide

So if you want to decide which kind of broker or planner makes the most sense for you, you can do a little experiment. Imagine it's time to make your investment and see if you have a solid idea of what you'd do. Write down what you'd buy and how much. If you don't feel confident to make these decisions, then you might want to consider a full-service broker or financial planner.

Remember, full-service brokers do not always have their interests aligned with yours. So even if you use one for now, it makes sense to keep learning and researching so that you can make these decisions on your own.

Photo Source: JMRosenfeld

Anonymous's picture

MoneyCone wrote:

Tue, 11/30/2010 - 13:29 Comment #: 1

Good info Melinda!

And then there are money managers who'll take your money and manage it for you. You normally don't have much say in how it is managed. Example: Bernie Madoff. Ok that was a bad example...!

Anonymous's picture

retirebyforty wrote:

Wed, 12/01/2010 - 05:11 Comment #: 2

Good intro!
I would like to add one thing. Don't ever use a "free" financial adviser at your local bank. These guys will push crappy loaded mutual funds like you wouldn't believe. If any financial guy trys to sell you loaded fund, just smile and nod and don't come back.

Anonymous's picture

Shaun wrote:

Thu, 12/02/2010 - 05:05 Comment #: 3

@retirebyforthy is right, there are a lot of people (brokers) out there that just push products that they benefit from the most!

If you are serious about investing, then you should be serious about learning as much as you can (or need). Playing on paper is a great tip Melinda, it's the safest and best way to test it out for yourself.

Melinda Gregory's picture

Melinda Gregory wrote:

Thu, 12/02/2010 - 14:58 Comment #: 4

Thanks for the comment! I agree, learning as much as you can before you take a plunge really applies here!

Anonymous's picture

Anonymous wrote:

Mon, 12/06/2010 - 16:47 Comment #: 5

With all the low cost investment choices these days, there's no need to have a full-service broker. In fact, you are making yourself poorer if you do.

Anonymous's picture

Festival of Stocks Monday the Thirteenth Edition wrote:

Mon, 12/13/2010 - 14:44 Comment #: 6

[...] presents Stock Brokers for Beginners posted at MomVesting, saying, “Before you dash off to Wall Street, take a few more minutes [...]

Anonymous's picture

Richard Stooker wrote:

Wed, 01/12/2011 - 17:43 Comment #: 7

Hi, Melinda,

I'd make your warning much stronger. Stay away from expensive, full "service" brokers -- period. No ifs, ands or buts.

The money they bleed from people's portfolios robs their retirements. They get rich and buy yachts while you go broke.

So use a good cheap discount online broker.

But first learn about Exchange Traded Funds (ETFs). They allow you to buy indexes as easily as buying individual stocks, but with the safety of diversification.

The spectre of picking and choosing individual stocks drives people to the false comfort of expensive, actively traded mutual funds, which should also be avoided, except for the Vanguard group.

New investors should learn that expenses matter a lot more than they realize. And the smaller their portfolio is, the more expenses matter.

A lot of people on Wall Street want your money. A few deserve some of it by giving good value in return. Most of them just want to make you think they're giving good value when they're not. Remember, no matter what they claim, nobody can predict the future.

If you can read and understand this blog post and this comment, you don't need to pay somebody to hold your hand. You just need someone who can access the floor of the New York Stock Exchange on your behalf and execute a few buy orders for ETFs. That shouldn't cost more than $7 per order.

Then you just need to work hard to make and save more money to invest with.

And the patience to leave your account alone until you have the funds to buy more ETFs.

Anonymous's picture

Everything You Need to Know about Stocks | MomVesting wrote:

Thu, 01/19/2012 - 21:47 Comment #: 8

[...] you're beginning, stock brokers can help you understand your options. But see how to find a good one before you get [...]

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