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How do you purchase stock?

Updated: 8/17/2019
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15y ago

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There are a few ways. The most common is to buy it from a broker. There are many kinds, among them being "traditional" brokers (a person in a suit who researches stocks, finds ones he or she thinks are good investments, and makes sale or purchase recommendations based on an investor's goals, financial condition and aversion to risk), "discount" brokers (a person in a suit who sells you stocks you picked out yourself), and "online" brokers (an internet-based company you establish an account with, then log on to buy or sell stocks yourself--this is kinda like a discount broker except no suits are worn). There are also direct stock plans. A company can register with the SEC to sell stock directly to investors. A lot of the time this falls under what's called a dividend reinvestment plan--instead of sending you a check for your dividend payment, the company uses the money to buy you more shares. The advantage of this to you is your portfolio grows on a regular basis. The advantage to them is increased investor loyalty. The disadvantage to you is if you have 10,000 shares of Coke stock and want to diversify, you can't call the DRP desk at Coke and ask them to get you some Caterpillar stock this time--they can sell you Coke shares, nothing else.

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