Jan 14 7 Main Ways Of Buying Or Investing In Stocks
As we have stated many times before on this blog, stocks are considered as the most viable investment instruments due to their high returns. When you invest in stocks, it means that you become a part owner of a certain company. As a shareholder, you will share the company’s profits and losses and your initial investment will either grow or depreciate depending on the company’s performance. There are many different ways through which an individual can buy or invest in stocks. Some purchases involve the services of a professional. And obviously if you hire a professional from any Clifton NJ accounting company, they can provide you advice and expertise.
We will look at some of the main ways of investing in stocks and you can choose the most suitable for your investment endeavors. You can categorize all these options as either individual channels or professional investment channels, depending on whether or not you will involve a third-party professional in your equity investment.
One of the individual investment channels is through the internet. You can now buy any stocks from any publicly traded stock exchange via the internet. Online stock purchases are the cheapest transactions because you only have to pay the standard transaction fees. The problem with this method is that it is the riskiest because you get little or no advice regarding your investment choices. To avoid making poor investment decisions, you should try to learn as much as possible about the stock market before buying shares online.
Through An Investment Club
Investment clubs are another type of individualized investment channel because you do not have to hire a professional to buy the stocks for you. You need join an investment club and meet with knowledgeable members though. This method can be time consuming and you can also be charged membership fees to join the club(s). Some investment clubs encourage members to pool their money in one account so that they can invest as a group.
Full-Service Or Fulltime Brokers
This is one of the professional investment channels where you hire a fulltime broker to help you make all your investment decisions. Expectedly, you have to part with substantial fees to retain the services of such a professional. In return, the broker gives you all the information, advice, and recommendations that you need to succeed as a stock investor.
You can opt for a more prolific professional investment channel by hiring a money manager. In addition to educating and advising you, the money or wealth manager will also actually select and buy the stocks for you. Typically, money managers cost a lot more than brokers, usually 1-2% of your total portfolio. Despite its high costs, this is the most convenient and most rewarding stock investment option.
You can use index funds like the Dow Jones Industrial Average or the MSCI emerging market index, to track the market for free. This is a cheap way of investing in stocks but it not very profitable because you only get to track the market.
A mutual fund employs a professional manager to make investment decisions to grow its net asset value (NAV). Mutual funds are diversified financial vehicles, hence they are quite safe, but they charge an annual fee of up to 3%. The good news is that the fund manager seeks to outperform the index in order to cover the stock price and his fees, hence nearly guaranteed profits.
A hedge fund is similar to a mutual fund in that they both involve the pooling of investor funds to invest in a collection of financial instruments. The only difference between the two is that hedge funds invest in highly-leveraged financial instruments called derivatives. Hedge funds are privately held companies, which offer higher returns on very risky investments.