Stocks represent individual ownership in a company. A share of stock is equivalent to a proportional share of ownership in a company. The goal of stock ownership is to see the value of the company increase over time. As the value of the company changes, the value of the share in that company rises and falls.
Brokerage firms are licensed to buy and sell securities for
clients and for their own accounts. Brokerage firms provide
individual investors their link to the financial markets by
employing brokers who carry out the investor’s order
to buy or sell securities.
The firm may be a huge, corporation with hundreds of brokers,
a small partnership with only one broker or any size in between.
A brokerage firm could also be a full-service firm, a discount
firm or somewhere in between. Typically, larger firms, and
full-service firms, provide an increasing range of financial
services, including financial planning, asset management,
and educational programs. In addition, many maintain research
departments for their own and their clients’ benefit.
Other brokerage firms, such as online firms and discount firms,
are increasingly providing their customers with a wealth of
investment information on their websites and encouraging their
customers to trade electronically.
An investor should note that while online and discount brokerage
firms may charge lower commissions than full-service brokerage
firms to execute their buy and sell orders, those firms are
also less likely to provide the range of services mentioned
above. This may not be an issue for many investors as extensive
information and online account access are now readily available.
The individual investors’ needs will dictate which services
will be required.