Fortunately, you have many choices when it comes to finding good stock brokerage firms. Some firms are very expensive because they offer a lot of hands-on help with investment professionals. If you don’t feel comfortable making your own investments, this might be the best approach.

Some investments, including CDs, mutual funds, and bonds, can be purchased through a bank. If you want to start a 401K, you need to talk to your employer about setting one up. If you want to invest in almost any other security, such as corporate bonds, stocks, currency, commodities, etc., you’ll need a broker.

Discount Stock Brokers

Discount stock brokers have been around for a few decades. They offer trades for much lower fees because you’re expected to do all the research and choosing yourself. If you plan on doing this anyway, a discount broker is the best way to save more on fees. The less you pay for fees, the more money you have to invest.

Online stock brokers have recently become more commonly used. These discount brokers are able to charge even lower rates, and they add the convenience of online investing. You can invest right from your own home.

What to Look for in a Broker

Decide if you want to work with a full service or online broker. Once you’ve decided, make a list of the top brokers in that category. The broker I use is Sharebuilder.com. You can learn more about Sharebuilder here.

Put the brokers side by side for comparison. Compare each aspect of each broker for a fair comparison.

How much do trades cost? What types of investments do they trade? What research tools do they offer? Which one has been around longer? What kind of reviews does each get?

Getting a review from existing customers is important because it gives you a more honest look into the company. For example, if the trades are slow, the broker isn’t going to tell you that, but someone who has invested with them will.

Security

Make sure the broker you choose has strong security in place. You are planning to give them your money. You need to be able to trust them. There should be actions in place that make their website secure. With all the internet crime these days, internet security is important.

Once you’ve chosen a broker, set up your account and start investing. Most online brokers will require you to fax or mail copies of some documents. This will take it a little longer to complete the process, which is why it’s a good idea to set up a brokerage account as soon as possible.

What are Dividends?

When you buy stock, you become a shareholder in the company. As a shareholder, you are entitled to assets of the company. A corporation may decide to share those assets in the form of dividends.

Dividends are paid out from the income of a company. A corporation can choose to reinvest their income or pay some of it to stockholders. Dividends are usually paid on a quarterly basis per share.

For example, a corporation may choose to pay its shareholders $0.50 per share. If you own 100 shares, you’ll be paid $50. If you own 2,000 shares, you’ll be paid $1,000.

Why do Corporations Pay Dividends?

Dividends are a way to share the wealth. Some stocks don’t grow as much as others because they are older and more established. These are often used as income investing stocks because investors can receive regular income in the form of dividends.

Some investors believe that dividends aren’t worth the trouble. They believe they aren’t significant for investors and that the money is better off being spent within the company for future growth.

Others argue that dividend paying stocks raise the price because investors know they will have some stability in earnings. Receiving regular dividend checks means stockholders will make money, even if the stock price is down or they aren’t selling. Also, if corporations that have regularly distributed dividends for years suddenly stop paying, the stock price could suddenly stock when people who depend on dividends start to sell.

Ultimately, dividends are a way for investors to make more money on their investments. Some people choose to reinvest their dividends to buy more stocks, and others use the dividend income to support themselves. Stockholders are owners of the company, and for many, it only seems fair that they should share in the profits at some point or another.

How to Make Money with Dividends

If you want to create regular income with dividends, the best way to do this is to buy shares of stock in companies that have historically paid regular dividends. Some brokers will allow you to have the dividends automatically reinvested, or you can have them sent to your account for withdrawal.

Another popular investment option is a dividend reinvestment program, otherwise known as a DRIP. This is a program set up with the company where you purchase stock and the dividends are automatically reinvested for you to purchase more shares. This is good for those looking to save money on trading costs and have their dividends reinvested.

There are many stock exchanges throughout the world where stocks are traded on every business day.  Because of the time changes, they are open at different times, but they all do the same thing.  They allow you to buy and sell the stock of corporations.

As an investor, you should be analyzing corporations and defining which you will decide to buy or sell based on criteria.  One way to help you along is to use a stock index.

An index is an average of a certain amount of stocks.  It allows investors to take a general measurement of the stock market.  There are many indexes out there.  Two of the most common are the Dow Jones Industrial Average, often referred to as the Dow, and the Standard and Poor 500, often referred to as the S&P 500.

How to Use Index Investing

What is the purpose of an index and how do you use it?  The purpose is basically its definition.  It is an average of certain stocks and allows for measurement.  If you want to see how the markets are doing as a whole, you may look at a certain index.  Or, you can measure what you have against an index.

Index investing is when you invest in an index in the form of a mutual fund.  A mutual fund is a pool of investments where you own part of it.  You are pooling your money together with other people’s money and that money is being invested into a bunch of investments.  An index mutual fund is a fund that is invested in the stocks that are a part of an index.

An index isn’t just an average of any stocks.  It is an average of the same set of stocks all the time.  Some may change now and then, but not frequently.  You can invest in an S&P 500 index mutual fund, for example.

The benefit to index investing is that you are investing an average.  Essentially, you will be earning an average of what the market is making.  This is a great way to invest if you don’t have the time or drive to choose your own investments.  You are getting a well-diversified investment without having to put much work into it.  You just choose the index fund you want.

Stock day trading is not your traditional stock investing.  Instead of buying a few shares of stock and letting them increase in value over 6 months or over the next few years, you will buy and sell stock much faster.

Stock day trading is short term trading.  Many traders use software to tell them when to buy or sell based on trends.  They look at charts and guess that it will move a certain way based on where it’s been and previous trends.

Day trading a full time job.  You work when the markets are open.  You can do really well, break even, or do horribly. It’s a risky business that requires experience and a lot of money to start.

Who can Day Trade?

Technically, just about anyone can try to trade stocks as long as they have money and a broker, but it takes a lot to be successful at it.  Of course, you need the right resources as well.  First of all, you need to have time during the right time of day.  If you work from 9 to 5, you won’t be able to trade unless you trade on a foreign market that is open when you’re available.  The more time you have available during trading hours, the better.

If you plan to be a full time trader, you should have back up resources.  Don’t quit your day job with nothing in the bank.  Try to give it a try while you are working and save at least 6 months of living expenses just in case.  This way you will be covered even while you aren’t making a profit.

Executing Day Trading Strategies

Day trading is all about strategies, and there are plenty of them including trend trading, channel trading, scalping, and contrarian trading. Day trading means buying and selling stock within the same day. This is very different than regular investing. It’s important to learn as much as you can about technical analysis and different day trading techniques before you start trading. The follow books will help you learn important strategies:
              

Before you Get Started

If you want to try your hand at stock day trading, make a plan and get to it.  Spend a few months saving your money to invest and to have as back up support money.  You need money to buy food and you need money to invest.  The more money you have, the better off you’ll be.

In the meantime, read, study, and learn everything you can to build up a strategy.  Start using a free stock market trading game to help you practice what you are learning before you are ready to invest in the real markets. Wall Street Survivor is a great game to help you practice stock day trading, and you can earn real cash prizes, too. Get started and sign up here.