When an online stockbroker, says "buy stocks for $4", do they mean $4 added to each share or?

Question

and also is etrade, scottrade, or sharebuilder the best if you are just starting out and don't want to invest a whole lot upfront? Also , when it says, you must put in $500, does that mean what you are already buying in shares or is that an added fee? Thanks so much

Answer 1

the $500 is your initial deposit to open an account, this is the money you use to make your first trades. Remember to figure in the commissions when you are trading. I would put in about $600 to start to cover fees so you dont overdraw your account.

the fee is added one time to each trade so 100 shares @ $5 = $500 dollars + the $4 fee= $504 total

I use scottrade, it has good customer service and tools

Answer 2

There are discount online brokers that will let you do market trades for only $4. They usually make it up by charging a lot more for Limit Trades or other services.

Market trades is where you tell it to buy or sell at whatever price is being offered at the time.

Limit trades are where you specify a hit price to buy or sell at.

I only use limit trades for almost everything. So look for the price of the limit trades before deciding on an online broker, and also for other "fees".

I use Scottrade and both limit and market trades are $7, except for penny stocks, which I do not buy.

If you only have $500 to work with, I would not be investing in stocks. Maybe mutual funds. You can get a real estate fund like UMREX at Scottrade in an IRA with a $250 minimum, no transaction fee, no load for that fund.

Answer 3

"Buy stocks for $4.00" means this broker will charge you a "commission" for buying the stock for you, since you can't do it yourself, in this case equal to $4.00. This commission is subtracted from your gain.... or makes your loss on the trade bigger, and can amount to a considerable amount if you become really active.

Different brokers charge different commissions, and when you're trading in an "on-line" fashion, the only material difference between one broker and another is the difference between their respective fees, hence the advertising message focuses on that value.

Other than that, most on-line brokers are pretty much the same except for their minimum account size, varying from a few hundred dollars to a few thousand....

...which is where your figure of "$500" comes from in this case. You can't do much in the way of stock buying with $100-200 anyway.

The broker is also doing what it can to be assured you didn't get this investment nest egg by breaking mother's piggy bank and purloining her grocery money.....

You didn't ask, but the primary problem in trading with small amounts of capital is the "margin call".

Example: Say you buy some stock for $400, in an account that has the minimum of $500 in it .... then the stock goes down in price. The broker's computer automatically and continually assesses this "decrease" against your remaing capital, even though you didn't buy anything with it. The broker does this to protect itself, in case you decide to get out when the price goes against you. Same thing is true if you "short sell" your purchase.

So, in this case, your $400 stock goes down $100 in value. $400 plus $100 equals $500, or the entire amount of your original $500 investment. Well.... the computer might instantly sell ALL your stock, so the broker isn't in the position of having to give you money to "bail you out". Different brokers have different rules on "margin" and "margin calls", usually found in miscropically fine print in 15 pages of legalese you have to sign before you can open an account.

Warning: most brokers will "lend" you money so your original capital position will buy more stock than your cash alone, so do some calculations to try out their rules.

Finally - you may have heard the old joke: How do you make a small fortune on Wall Street? Start with a big one..... Good luck.

Answer 4

$4 is the commission for the transaction.
$500 is the minimum to open the account.
sharebuilder is great for just starting out with small amounts of money. They are great if your are also going to add money to the account on a regular basis (monthly or on payday or whenever you have spare pocket change etc) its a basic way to build up an account

However if your starting small there is another way to go
Buying Stocks Without a Broker is a book by charles B Carlson that details how to do just that and contains a list (not compleat but very lengthy) of companies that will do this. Good luck to you.

Answer 5

Tough to figure out all that crap, doublespeak, and legalese, ain't it Tex? But I think you are not familiar with all the types of investment companies and what they really do. And this space is too small to explain. I will advise 2 things: 1) read Dave Ramsey's book "The Total Money Makeover" at www.daveramsey.com, and 2) DON'T GIVE ANYONE A PENNY UNTIL YOU UNDERSTAND EVERYTHING ABOUT WHAT YOU ARE DOING.

Better to put your money in savings until you are completely educated on types of investments, investment companies, the stock market, etc.

Good Luck

Answer 6

The $4 fee is for buying a set amount of shares and is not added to the price of each share.

Answer 7

$4 is the fee.

http://stocks.about.com/

The link may answer some of your other questions.

http://www.edwardjones.com/cgi/getHTML.cgi?page=/entry/index.html