Buying A Stock. Part 1

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You’ve never bought a stock but you understand the basics of the stock market and are ready to take the plunge as soon as someone answers two questions: 1) How do I find a good stock? and 2) should I use a full-service broker, a discount broker or buy the stock online? Here are the answers; you’ll see that the answers to the questions are interrelated and that you need to answer the second question first.

Should I use a full-service broker, a discount broker or buy the stock online?

The way to find a good stock depends on how much work you’re willing to put in. If you don’t want to be bothered with researching a stock and its company, but prefer to let a pro choose stocks for you and provide financial-planning advice, hire a sharp full-service stockbroker (from a firm like Merrill Lynch, PaineWebber or A.G. Edwards) who understands the kind of stocks you want to own. You’ll pay this broker a commission when you buy and sell stocks, of course (perhaps $80 for 100 shares of a $30 stock). But the fee will be justified if you trust the broker’s judgment. There’s no guarantee that the stocks the broker picks will all go up, but you do want to see in a year’s time that the stocks have done better than the realistic goal the two of you have set.

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