WHERE CAN YOU BUY COMMON STOCK?
Learn even more about this topic with the Encyclopedia of Personal Finance™
You can buy common stock in several different ways. First, you
can purchase stock from the company as an initial public offering (IPO)?the
company's initial offering of stock when it "goes public." When you buy IPO
stock, however, you bear the risk of buying securities from a new or very small
company that has not been tested in the marketplace.
You can purchase common stock through a broker-dealer over the
counter or on one of the nation's organized stock exchanges?the New York Stock
Exchange or American Stock Exchange, for example?where investors buy and sell
shares. On the secondary market, the prices of stocks can fluctuate rapidly
according to the supply of and demand for each company's shares. You will pay a
sales commission for the transaction.
If you already
own stock in a company that offers a dividend reinvestment plan (DRIP),
you can purchase additional shares this way. Sometimes companies allow you to
buy additional shares beyond what you could afford to purchase with your
dividends alone, and some even offer a discount to shareholders. You may pay a
reduced sales charge, or, even better, no sales charge at all for these
Finally, you can participate in common stock investing through a
mutual fund that invests in stocks.
Not only are there several methods for purchasing common
stock, but there also are many types of common stock to choose