Buying A Stock. Part 2

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That goal could be “beating the Standard & Poor’s 500 stock index,” essentially the rate of return for the U.S. stock market. Or the goal could be earning more than what you’d get from a bank CD.

Note: Don’t agree to buy any stock the broker recommends, however, until you have read material she or he has given you about the company and its prospects that convinces you the stock will be a long-term winner.

If you’re willing to do your own stock research, you can save money on brokerage commissions by using either a discount broker or an online brokerage. Online brokers are generally the cheapest, charging between $8 and $30 for buying a stock any time of the day or night. A recent SmartMoney magazine survey rated Discover Brokerage Direct (www.discoverbrokerage.com), Datek Online (www.datek.com) and Waterhouse Securities (waterhouse.com) the best online brokers overall, though Ameritrade (www.ameritrade.com) was the cheapest and Charles Schwab (www.schwab.com) and Quick & Reilly (quickwaynet.com) had the best free stock research for investors. Discount brokers like Charles Schwab, Fidelity and Quick & Reilly let you buy stocks either over the phone or in their walk-in offices. The amount you pay usually depends on the level of service the discounters offer. Some provide reports on stocks by brokerage analysts and lists of mutual funds; others, known as deep discount brokers, don’t and therefore charge less. A traditional discount broker might charge 20% to 60% less than a full-service broker and a deep discounter’s commission could be 70% to 80% less. Don’t sign up with any discounter until you’ve asked for a list of all its miscellaneous fees and its hours of operation.

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