A. There are three ways you can buy stocks in the U.S. -
1. Through a Brokerage Firm
Pros: If you have no idea which stocks to buy, there are brokers at those major national brokerage firms help you decide which stocks to buy at what prices.
Cons: The brokers will charge you commission each time you buy and sell stocks, and commissions could be as high as 1.5%.
2. Through a Discount Broker
Pros: You save money by using a discount broker to buy and sell stocks, some discount brokers even offer their services free!
Cons: You need to know which stocks to buy and sell, by yourself!
3. From the Company Directly
You can buy stocks from a company that offers it directly, it's called a Dividend Reinvestment Plan (DRIP).
Pros: Very low cost, since you don't have to do it through a licensed broker. The company will reinvest your dividends into more shares, usually for a small fee.
Cons: Not every company offers this, only about 1,000 companies, typically large ones such as IBM and Wal-Mart.
While DRIP is a great long term investment plan, in our next blog post, we will discuss some of the major disadvantages of DRIP.