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Questions About Buying Stocks

Buying and selling stocks can be an exciting endeavor where significant amounts of money can be made if you take the time to learn the basics, do your research and set your goals ahead of time. Investing in stocks though is not without risk and this article will deal with some of the basics of buying and selling stocks.

A single share of stock signifies one share of ownership and a publicly traded company. In order to facilitate the buying and selling of stocks brokerage houses match buyers and sellers and complete the transaction which transfer shares from one individual or organization to another. The various types of brokerage firms are full service, discount and online.

Full service brokers will charge a higher per transaction fee but normally have account managers and other individuals who will assist in the decision-making process and answer questions so you can make informed decisions when purchasing shares of stock. Discount brokerage firms still allow you to talk individuals but they normally only provide a means to execute the trade for purchasing and selling stock. Research is often conducted by the individual or company to determine what stock to buy. Online brokerages have the most significant savings and lowest per transaction cost but the account holder is solely responsible for what to buy and when to sell.

When buying or selling stock it is important understand risk aversion. Risk aversion signifies what level of risk and investor is willing to assume when making an investment decision. If you have a low risk aversion you will want to stick to various investment vehicles like certificates of deposit and money market mutual funds. Investors with a higher risk version are more comfortable with purchasing riskier investments such as stocks, futures and trading in options. The rule of thumb is if you are afraid to lose your money or can not afford to lose your money then stay with safe investments.

The price of a stock is determined by at what price one investor is willing to sell a share of stock and another investor is willing to pay for that share of stock. Due to volatility in the stock market and the level of volume a stock has the final price for the stock purchased or sold may vary slightly from when the trade was placed. Stock trades are also normally placed in blocks of 100 shares so keep that in mind when purchasing a stock.

The stock market is not FDIC insured which means it is possible that all money invested can subsequently be lost should the unexpected happen. If a company declares bankruptcy then the publicly traded shares of stock in that company become worthless. Keep this in mind when purchasing stock and as stated earlier if you can not afford to lose every penny then do not purchase stocks.