1)Do I have to use a broker to start investing in the stock market? I'm an average person interested in buying some stock to have just another means of income for retirement. I don't have a vast amount of money to invest. I'm just beginning.

There’s no rule that says you have to use a broker — just the way you’re free to buy or sell a house without listing it with an agent. But much like any market, the price you get — as a buyer or seller — is usually better if you’re looking at the same prices that every other buyer and seller is looking at.

You also have the benefit of seeing the minute-by-minute prices that other buyers and sellers are paying. The two primary American stock markets — the New York Stock Exchange and the NASDAQ — are basically gigantic auctions with millions of buyers and sellers trading billions of shares a day. So you’ll probably get a better price there than you will on Craigslist or eBay.

Some companies will sell you their stock directly and let you reinvest the dividends in new shares or buy more with cash. You’ll save on the broker’s commission, but you’ll have to deal with one company at a time. And redeeming shares (selling them back to the company) usually involves more paperwork than placing a trade with a broker.

2)You say you want to invest, but you don’t know where to start? This investing primer walks beginners through each step along the way to becoming a shareholder.
It's a question we get a lot around here: How do I buy stocks? It sounds simple to experienced investors, but getting started can seem daunting. With this column , I'll take new investors through each step of becoming a shareholder.
But first you have to know what are stocks?

The intermediaries
The first step in buying shares is deciding who will help you buy them. The most likely middle-man is a stockbroker, of which there are two main types:

  • Full-service brokers offer financial planning and advice on selecting investments such as stocks and mutual funds. They usually have offices you can visit, and an individual broker is usually assigned to each customer. Full-service brokers are the most expensive way to buy shares. You'll typically pay around $70 to buy or sell a batch of shares, compared to $20 or less with a so-called discount broker. That can be money well spent if you don't have the time or interest required to manage your portfolio on your own.
  • Discount brokers cater to investors willing to do their own research and make their own investing decisions. Most don't have local offices — they typically operate online or over the phone — and don't offer investing advice. Because their trading commissions are low, discount brokers are a good choice if you pick your own funds and stocks. Some brokers, such as Charles Schwab, straddle the line between full-service and discount, operating branch offices and offering some financial advice. Click here to learn how to pick a stockbroker.

Funds versus stocks
There are two basic ways to invest in the stock market: You can buy stocks of individual corporations, or you can buy mutual funds.

Mutual funds invest the pooled funds of thousands of investors. By investing in mutual funds you gain the advantages of professional management. Because most funds hold dozens, if not hundreds, of stocks in their portfolios, investing in funds also gives you automatic diversification.

That is an important advantage. Even if you're a gifted stock-picker, inevitably something unexpected will happen that will sink the share price of one of your stocks. Such an event could be a disaster if you only own a few stocks, but would be no big deal for a mutual fund holding a hundred or so stocks.

Mutual funds often specialize in specific market niches, such as small companies, health-care stocks, fast-growing companies, etc. You can buy mutual-fund shares directly from a fund company — such as ABN AMRO Mutual Fund or Birla Sun Life Mutual Fund, which offer a variety of fund types — or through a stockbroker.

Even if you use a broker, you are actually buying from the mutual-fund company itself. The funds are technically freestanding companies. They create new shares when investors buy more fund shares than they sell, and eliminate shares when more shares are sold (redeemed) than bought.

Stock prices rise or fall depending on investor demand. If more people want to buy a stock, its price typically goes up, and vice versa. But mutual-fund share prices reflect the value of a fund's holdings, not supply vs. demand.

Most mutual funds establish minimum purchase requirements. Once you own a fund, you can usually add to your holdings in smaller increments. For instance, the Birla SunLife Equity Fund (G) requires a Rs5,000 minimum initial investment. After that, you can add to it in some increments.
What you pay
Unlike individual stocks, where you can trade any stock listed on a major stock exchange through any broker, no broker makes all mutual funds available to its customers. They pick and choose.

But most brokers have more than enough funds to meet an investor's needs. By using a broker, you'll only get one statement each month showing the performance and balances in each of your funds. It's also convenient when you want to sell one fund and buy another, as you will have a much wider selection to choose from.

However, that strategy may be more costly if your broker charges a transaction fee to trade the funds you've selected.

Some funds levy charges known as loads, essentially sales commissions that the fund pays to the financial advisor or stockbroker who sells you the fund. Funds that charge such fees are called "load" funds, and those that don't are "no-load" funds."

Loads can be charged when you buy (front-end loads) or when you sell (deferred loads). Front-end loads, typically 5.75%, are subtracted from your funds right away, reducing the amount that actually gets invested and your gains over the long term.Those loads eat into your investment gains, so there is no reason to buy a load fund unless you are relying on a financial advisor or broker to help you pick funds. In theory, it's that advice you're paying for.
Managed funds vs. index funds
Managed funds employ a fund manager, who picks the stocks he or she thinks have the best chance to rise in price.

By contrast, index funds attempt to match the composite investment gains of all stocks making up a particular category, such as large companies, small companies or technology companies. Or, in some cases, to match the investment gains of the entire stock market.

Since, in theory, fund managers wouldn't choose obvious losers, you'd think that most managed funds would readily outperform index funds. But that's not necessarily the case. Sometimes they do and sometimes they don't. The relative performance of managed funds vs. index funds depends on the particular index and time period that you analyze.

Here are two no-load managed funds that have consistently outperformed the overall market over the past five years:

* Fairholme (FAIRX, news, msgs): a blend of small-, mid- and large-cap stocks in both the value- and growth-priced categories.

* Kinetics Paradigm (WWNPX, news, msgs): mostly mid- and large-cap stocks in both the value- and growth-priced categories.

* Fidelity Select Medical Equip/Systems (FSMEX, news, msgs): a blend of mid- and large-cap growth-priced stocks in the health-care industry.

Here are two no-load index funds:

* Wilshire 5000 Index Portfolio (WFIVX, news, msgs): It emulates the Wilshire 5000 Index ($TMW.X, news, msgs), which essentially tracks the entire U.S. stock market.

* Vanguard Small-Cap Index (NAESX, news, msgs): It emulates the Russell 2000 Index ($RUT.X, news, msgs), which tracks small-cap stocks.

Index funds vs. exchange-traded funds
Within the index fund category, you have another choice: traditional index funds vs. the new kid on the block — exchange-traded funds (ETFs).

The primary difference between exchange-traded funds and conventional funds is that ETFs trade just like stocks. You pay the same commissions you would for buying or selling stocks, and there is no limitation on trading activity.

For that reason, active traders prefer ETFs. However, because you pay a commission every time you buy, ETFs are not suitable for investors who want to invest on a regular basis — say, monthly (a smart strategy known as dollar-cost averaging.)

Here are two index funds available as ETFs:

* Diamonds Trust (DIA, news, msgs): It tracks the Dow Jones Industrial Average, a group of large, established companies chosen by the editors of The Wall Street Journal.

* NASDAQ 100 Trust (QQQQ, news, msgs): It tracks the Nasdaq 100 Index, which in turn tracks the 100 largest nonfinancial stocks listed on the Nasdaq stock exchange.

Buying and selling mutual funds
Many mutual funds have similar names, so it's best to use ticker symbols when you research and trade mutual funds.

Unlike stocks, where you specify the number of shares you want to buy or sell, for mutual funds, you usually enter the dollar value that you want to trade. If you're using a discount broker, most give you — on their Web sites — a way of seeing the minimum purchase requirements and applicable transaction fees when you enter a fund's ticker symbol. (Our Easy Fund Screener has similar information.) When you buy, you must specify whether you want dividends and capital-gain distributions from the fund credited to your account in cash or reinvested in fund shares. Dividends are profits paid by companies to their shareholders, in this case, the fund. A fund realizes capital gains when it sells shares of a stock whose price has gone up. Most investors choose to reinvest the distributions.

Conventional mutual funds (not ETFs) trade only once daily, after the market closes. If you miss the deadline for the day you enter the trade, your transaction will be processed after the market closes on the following day.

When you sell fund shares in a regular brokerage account, your broker will tell you whether you've realized a gain or a loss on the sale. You will have to pay taxes on any gains (unless the shares are held in a tax-deferred account like a 401(k)). Your year-end brokerage statement should show your total gains or losses for the year and how to report them on your tax return. Click here for more information on how to minimize the tax bill on your investments.

Mutual funds are a good way for beginning investors to get into the market. After you've got your feet wet, you may want to move on to individual stocks.
3) How to Buy a Single Share of Stock as a Gift
One of the most common questions I get is "How do I purchase a single share of stock as a gift for a wedding/christening/birthday party/etc?" Here, you can learn how!
Here's How:

1. Decide the company you want to buy stock in. Be sure to select something appropriate for the beneficiary of the gift. For instance, it would be a great idea to purchase Disney or Toys R Us stock for a newborn's birthday.
2. Go to one of the web pages listed below.
3. Browse the catalog for the stock you want to purchase. They both have a large inventory of corporations available.
4. Once you have selected the stock you want, you will have to enter the Social Security Number of the person you are buying the gift for. This is so the stock certificate will be legally registered in their name.
5. Select the kind of frame you want. This is optional.
6. Enter an message for engraving underneath the certificate. This is optional.
7. Decide whether you want to the stock to be shipped to you or directly to the beneficiary of the gift.


1. Remember, if you can't find the shares you want at these sites, you can buy them through your brokerage account and have the certificates mailed to you. If you go this route, you can expect to wait up to 6 weeks.

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