What Services do Discount Brokers Offer?

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What Services do Discount Brokers Offer?

Investing in the stock market has been big business for many years with its history on Wall Street dating back to the 1700s. As the market grew in the United States over the years, individuals across the country began to take an interest in buying and selling stocks. The popularity of the stock market has given rise to companies that serve as stock brokers. With the advance of technologies such as the internet, information that once was dispersed to a select few can now be collected by anyone with a computer and internet connection. This has led to the creation of discount brokers, such as Firstrade.

The stock broker acts as an agent that makes stock market transactions on behalf of their customer. In exchange for their services, the broker receives a commission which can be a set fee or a percentage of returns. A full-service stock broker offers one-on-one time with the investor and provides advice for trading. However, due to the fact that stock information is now available to just about anyone, the market for discount brokers emerged. This type of stock broker offers multiple stock market related transactions with little or no personal interaction for a discounted rate.

Stock Purchases

Probably the most straight forward service provided by the discount stock broker is the purchase and sale of stocks. A stock is a financial instrument that entitles you to a claim on a portion of the assets and earnings of the corporation in which the stock is purchased. Stocks are sometimes referred to as shares or equity. You might purchase a stock in hopes that the company represented by the stock will increase in value, thus causing the stock price to increase. You can then sell the stock at the higher price and earn a profit.

There are two types of stocks that can be purchased, common and preferred. Common stocks give you, the investor, a right to vote at the annual shareholders meeting for the company. This stock also entitles you to receive dividends from profits made by the company. Preferred stock, on the other hand, often does not grant you voting privileges. However, with preferred stock, you possess a greater claim on the assets and earnings than does the holder of common stock. With preferred stock, you will receive dividends before those who hold common stock and preferential treatment in the event the company falls into bankruptcy.

Options

Options in the stock market are slightly more complicated than stocks. When you purchase an option, you are creating a contract with the option writer. This contract provides you with the opportunity to purchase a stock or other financial instrument at a set price within a determined time period. When you buy an option, you are not required to complete the transaction. You might purchase an option on a stock if you believe it will increase in value within the option's term. If the increase occurs, you can purchase the stock at the agreed upon price, not the increased value, and sell it for a profit. If the increase does not occur, you are not obligated to purchase the stock and will only lose the cost of the option.

Other Products

Discount brokers also commonly offer other investment products to their customers. You might invest in a mutual fund through this type of broker. A mutual fund is an instrument that pools the funds of multiple investors to increase buying power. You receive a return on your investment in the fund in proportion to the amount of money you have contributed. The discount stock broker may also offer fixed income products, such as bonds and certificates of deposit. These offer set return rates for a specified amount of time. Finally, the discount broker might also offer the traditional broker-assisted services you might find at a full-service stock broker, though you will likely pay more for these services.

For the investor familiar with the stock market and confident in their ability to make informed stock decisions, discount brokers such as Firstrade, offer an excellent opportunity to invest. The information necessary to make informed trading decisions is widely available. Most discount stock brokers themselves provide multiple market tracking tools. With the discounted rates, you, as the investor, have the opportunity to direct more of your funds into income generating investments rather than fees. When choosing a discount stock broker, taking the time to carefully consider the products and services provided by the broker is essential to making an informed choice.

Danielle Taylor writes out of New York about different personal finance tips, including how to find reliable discount brokers such as Firstrade. Always looking for the most favorable investing options, she tends to end up planning her finances at http://www.firstrade.com more often than not.

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