Ways to Get Involved in the Stock Market
Are you watching the ups and downs of the world's securities markets and wondering how to take part? If so, you're like many others who have always been interested in the stock exchanges but never had the time to sit down and open a trading account.
The good news is that it’s now easier than ever to join the ranks of the world’s millions of active traders in a number of different ways.
For instance, you can hire a broker and purchase shares directly, use a trading app, buy CFDs (contracts for difference), join a DRIP (dividend reinvestment program), sign up with your employer’s stock purchase plan, and get in on the action in other ways. Here’s a short list of how people from all walks of life are getting involved in the securities markets. Note that you aren’t limited to only one way because it’s legal and common to use two or more methods at the same time.
You can always take the traditional route and call a brokerage firm to place an order for shares of your favorite corporation’s stock. This method has been around for more than 100 years, and people still use it. However, with all the speedy technology available today, and the ability to bypass traditional brokers, this way of getting involved in securities trading is not as popular as it once was.
CFDs: Contracts for Difference
If you prefer to use an online broker, as millions of people do every day, CFDs offer a fast, inexpensive way to take part in the action of the global securities exchanges, either as a buyer or a seller. CFDs are unique instruments that let you go long or short, with no commission, by purchasing a contract rather than directly buying shares. That contract is essentially a prediction that you make about whether the underlying stock will rise or fall in value. They’re one of the simplest ways for new and experienced traders to get involved in today’s fast-moving markets.
CFDs are unique instruments that let you go long or short, with no commission, by purchasing a contract rather than directly buying shares.
Some investors prefer to do everything on their mobile devices, which is why some of the trading apps have become wildly popular. It’s easy enough to follow multiple prices and securities, make instant buys, sell just as quickly, and do it all from your handheld device, tablet, laptop, or virtually any computer that’s connected to the internet. Keep in mind that you can combine just about any of the popular apps with your own brokerage account. Most of the better online brokers offer site-based apps, programs, and platforms that can do just about any kind of analysis you need. Plus, you can use nearly all of them on your mobile device as long as you download the software from your brokerage site.
ETFs and Mutual Funds
Exchange-traded funds (ETFs) and mutual funds are two of the common ways for investing enthusiasts to gain exposure to a broad range of companies or sectors at the same time. They behave much the way index funds to but with a narrower focus. For example, you might select an ETF that tracks the entire healthcare industry and is made up of 20 or more stocks in that particular niche. When healthcare, as a whole, does well, so does your ETF. Mutual funds work pretty much the same way but tend to come with more fees and not offer as direct a connection to specific market segments.
Dividend reinvestment programs have been around a long time but are enjoying a new surge of popularity among first-time and experienced investors. When you join a DRIP, there’s usually a small fee, but after that all your purchases are commission-free. When one of your holdings pays a dividend, the amount is automatically reinvested into the portfolio in the form of a fractional share. If your DRIP doesn’t offer fractionals, then the money is simply held in your account until the amount is sufficient to buy another whole share. DRIPs are an effective way for account holders to magnify the power of their dividends by plowing the money directly back into the portfolio.
If you’re lucky enough to work for an exchange-listed company, it’s possible to buy a set number of shares at reduced prices on a set time schedule. Many companies allow workers to purchase five shares, for example, every month for slightly less than market value. Most of these employer-designed programs forbid buyers from selling for a certain amount of time, like one year or six months.