The first question most beginners to the stock market have involves buying stocks.  Let’s take a look at two ways you can buy stocks – brokerages and DRIPs/DIPs.

Finding a broker

The most popular way of buying stocks involves using a brokerage.  There are two types of brokerages, full service and discount.  Full service brokerages offer special attention to its clients and also charge heftier commissions.  Discount brokers on the other hand while offering less personal attention, offer very low commissions.

Online discount brokerages such as E*TRADE and Scottrade have become a huge hit in the past several years and have opened up the market to the “average joe”.  Traditionally it has been a haven for the rich, but nowadays just about everyone is involved in the stock market.  Trade commissions have seen a huge decrease in costs as competition has become fierce.

Opening an account with a brokerage firm is very simple and much like opening an account with your bank.  You can also deposit and withdrawal money from your brokerage account and some even offer check writing privileges against your cash balance.  Once money is deposited in your brokerage account, you are ready to begin buying stocks.

Drips and Dips

A less popular way of purchasing stocks involves using whats called DRIPs and DIPs, or Dividend reinvestment plans and Direct investment plans respectively.  Both plans allow you to invest directly with the company, saving you money on commissions.  This is a great way to make smaller investments at regular intervals in a particular company.  However, unlike a brokerage, you don’t have the flexibility and speed of moving your money around into different stocks.

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