Share Buying

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Category: Buy Shares

There are various methods of buying and financing shares. The most common means is through a shares broker. Whether they are a full service or discount broker, they arrange the transfer of shares from a seller to a buyer. Most trades are actually done through brokers listed with a shares exchange. There are many different shares brokers from which to choose, such as full service brokers or discount brokers. The full service brokers usually charge more per trade, but give investment advice or more personal service; the discount brokers offer little or no investment advice but charge less for trades. Another type of broker would be a bank or credit union that may have a deal set up with either a full service or discount broker.

There are other ways of buying shares besides through a broker. One way is directly from the company itself. If at least one share is owned, most companies will allow the purchase of shares directly from the company through their investor relations departments. However, the initial share of shares in the company will have to be obtained through a regular shares broker. Another way to buy shares in companies is through Direct Public Offerings which are usually sold by the company itself. A direct public offering is an initial public offering in which the shares are purchased directly from the company, usually without the aid of brokers.

Selling shares is procedurally similar to buying stock. Generally, the investor wants to buy low and sell high, if not in that order (short selling); although a number of reasons may induce an investor to sell at a loss, e.g., to avoid further loss. As with buying a shares, there is a transaction fee for the broker's efforts in arranging the transfer of stock from a seller to a buyer. This fee can be high or low depending on which type of brokerage, full service or discount, handles the transaction. After the transaction has been made, the seller is then entitled to all of the money. An important part of selling is keeping track of the earnings. Importantly, on selling the stock, in jurisdictions that have them, capital gains taxes will have to be paid on the additional proceeds, if any, that are in excess of the cost basis.