There are so many different types of investment you can get involved in, however you might want to think about using the services of a broker to deal with things for you.  Basically brokers work for brokerage houses and are able to buy and sell on the stock exchange.  You may think that it's not important to use a broker but the truth is that you do need one.

When someone wants to become a stockbroker there are a number of different tests they need to pass in order to get a license.  It's not at all easy to pass these tests and the majority of brokers also have an understanding of business and finance and will have a Bachelors or Masters Degree.

First of all, you need to be aware of the differences between a broker and an analyst.  Someone who is an analyst will look at the stock market and try to predict how things will go.  Whether they should buy or sell a particular stock.  A broker on the other hand simply follows the instructions you provide.  Basically they analyze the market to tell you what you should do.

How a broker makes their money is via commissions on sales.  So when you tell your broker to buy or sell some stock, they will make a percentage of that amount.  However there are some that simply charge a flat fee regardless of how much the transaction is.

Another thing you need to understand is that there are a couple of types of broker you might want to use.  There is the full service broker who can offer you more kinds of investments and may even provide you with advice.

A discount broker on the other hand won't normally give you any advice at all and also won't do any research.  They just carry out the instructions and give you no other benefits.

You're going to have to decide yourself whether you want a full broker or a discount broker to work on your behalf.  For the novice investor then a full broker is more than likely the better option to ensure you are investing wisely.  They can make up for your lack of knowledge. 

However if you're experienced in the stock market and feel you know what you're doing then a discount broker might be perfectly good.

Before you rush into anything, you will also want to think more about what you want out of your investments.  Are you wanting to buy a home?  What about retiring?  Or perhaps you want to fund college education?  Understanding your motives for investing is very important.

Unfortunately, people think they're going to become instant millionaires with investing.  OK, so you might be really lucky, but it's very unlikely that this will happen.  Instead it will probably be better to think about your investment over the long term and allow it to grow slowly.  If you still want to make a quick buck, you need to look at what options you have in terms of high-yield, short term investing.

Talking to a financial planner is a very good idea and they will help you decide what sort of investing is suitable for your circumstances.  They will be realistic about what you should and shouldn't expect.

Published in Personal Finance