How To Buy Preferred Stock And Common Stock - Step By Step Guideline
How to buy preferred stock and common stock article is mainly a step by step guideline for novice stock traders.
In stock trading, the most common type of stocks traded is common stocks. All companies may not issue preferred stocks but every public company issues common stocks. To buy common stocks of major blue-chip companies at the right price is the dream of many investors.
Preferred stocks pay more dividends but come with certain limitations. It offers some benefits that common stocks don’t.
At the end of the day, both preferred stocks and common stocks help a company grow and expand. Investors who invest in them are granted certain ownership privileges. Thus it benefits both parties, and the stock market plays a crucial role in our economy.
In this article, we will explain the different ways by which you can purchase common stock and preferred stocks to enjoy the different quirks and features that come along with the ownership of these stocks.
Why Should You Buy Stocks?
Companies release stocks to fund capital to start and grow their business. Using the money raised by the shareholders, the company meets its expenses to expand its operations.
But as an investor, why should you invest in these stocks? Certainly, some benefits are attractive for these investors to venture into these stocks.
If we consider common stocks, they have the highest rate of return amongst other similar forms of investments. This includes bonds and preferred stocks. It is one of the best ways to combat inflation by receiving a steady rate of return averaging 5% -6%.
On the other hand, preferred stocks offer fixed stable returns, priority over common stocks, low-risk level among other benefits.
Owning stocks is one of the key elements of capitalism and the freedom to enjoy a free enterprise.
Other reasons to buy stocks include limited risks, ownership rights such as voting power, and capital gains. Whether it is common stocks or preferred stocks, both will earn you sold returns provided you invest in the right stocks.
How To Buy Preferred Stocks And Common Stocks?
Buying stocks is an easy process. With the advent of fast and readily available internet, you can now buy stocks from the convenience of your home with the click of a button.
In this section, we will describe the various methods through which you can purchase common stocks and preferred stocks.
Choose The Right Type Of Broker For You
One of the first decisions that you need to make is to find out the type of broker that suits you the best.
There are two types of stockbrokers in existence:
- Full-Service Broker or Traditional Broker
- Discount Broker
We will explain these two broker types so you can make a more informed decision and make your stock trading convenient and hassle-free.
Full-Service Broker:
As the name suggests, these brokers provide comprehensive and complete stock trading services to their clients. They are more expensive and complicated than discount brokers.
These brokers are also called traditional brokers. They offer varied services related to stock trading such as retirement plans, tax advice, investment tips, margin providing, portfolio updates, and much more.
One special feature about these brokers is that they provide customized services to their clients. The brokerage cost is directly correlated with the level of customization.
Full-service brokers are not limited to single customers; they provide full service and expertise to investors with multiple financial ventures. They take care of your estate planning and tax planning. So the investor gets a reliable service with many features but it comes at a high cost.
These brokers also hire market researches and analysts in their team who provide you with the latest and the most accurate market analysis to help you know the best stocks to invest in.
In summary, if you are a long-term investor looking for complete trading service solutions, and don’t mind spending a premium for these services, then the full-service broker would be the right choice for you.
Discount Broker:
Discount brokers are simply known as online brokers that trade stocks via their stock trading platform.
Traders trade on their own with little to no interaction with the broker. This kind of broker is recommended for investors that don’t want to spend a lot on commissions and fees.
Full-service brokers provide a dedicated investment team to assist you, but discount brokers usually only provide free education and research tools.
The tradeoff here is the lowered costs in terms of fees and other costs. Discount brokers are recommended for beginner traders or those who like to buy and sell stocks frequently.
An online broker is the easiest way to purchase stocks. Long gone are those days when you had to buy shares physically.
Now you can just sit at home and open an account through an online stockbroker, and explore the world of the stock market.
Though the process might be simple and hassle-free, that doesn’t mean you choose any online broker you come across. Moreover, you must very carefully choose your online stock broker or else you might risk losing your hard-earned money.
Factors To Choose The Best Stock Broker
So the question arises, what should you look for in an online broker? Certain factors allow you to filter the brokers to suit your preferences and needs. Some of them are:
