As a new investor, there’s a lot of information to research and plenty of techniques to develop. How do you make smart decisions when you first start investing? One positive move is to learn who the primary players are.
Stock Market Professionals
The stock market has many active players and understanding their roles is an important element of investment success. The duties of a broker, dealer, market maker, and trader are quite different. Some of these professionals work to arrange sales and others work to keep the market fluid. The better you understand the players and their roles, the better you’ll be ready to make successful decisions.
Brokers and Brokerage Firms
Brokers are either individuals or firms that carry out the sale or purchase of investment orders. These professionals generally charge a flat fee or require a commission for their services. In the past, only wealthy investors could afford the services of a broker, but the growth of the internet has led to the rise of many discount brokers. This change made it possible for just about anyone to invest. However, the services offered by discount brokers are much more limited than the offerings of full-service brokers.
Investment Dealers and Advisors
Investment dealers, or advisors, are generally hired by securities firms to work with clients, both retail and institutional. The dealers may handle research, trading, or underwriting. Dealers may also represent themselves or a firm when negotiating the sale or purchase of securities. In other words, a broker may represent a client while a dealer acts as in his or her own interests. Dealers profit from the range between the bid and ask prices. They also add liquidity to the market. Liquidity defines how quickly purchases or sales can be made without upsetting the asset’s price.
Market makers include banks, brokerage companies, and other firms who act as something of a middle man. If a seller wants to sell a large chunk of shares, a market maker may buy the stock, even before a clear buyer shows interest. Market makers may also place large orders to certain types of stock. This work speeds up the process of matching buyers to sellers. These players increase market liquidity. In return for their risk, they sell stocks for a higher price than what they paid. The difference is their compensation.
Investment or Stock Traders
“Stock trader” refers to any investor in the market. They may be individuals representing themselves or professionals working on behalf of a firm or client. Traders may act as portfolio managers, handle hedge funds, or represent management investment companies. If you studied the various strategies and methods for penny trading, for example, you could become successful as an individual stock trader, buying and selling for your own profit. Institutional traders focus on earning profits for specific capital portfolios.
Who Can Help You Most?
As a new investor, you have a lot of options. You could put down a lump sum or dedicate a certain amount of money each week. You could represent yourself, or you could hire a broker or a full-service brokerage company, such as one of those at FX-List, or a financial planner to create a plan for reaching your investment goals. Regardless of which route you take, remember that it’s natural for the market to fluctuate. Some experts recommend keeping your portfolio simple and focusing on the long-term for the best chances of success. The market will go up and down, so plan to wait patiently for that long-term investment growth.
None of the involved professionals control the stock market. None of them knows how the market will fluctuate. However, with experience and intelligence, the right professionals can help you make a lucrative start in investing.
Categories: Stock Market