Investments Brokerage Account

• Most stocks are traded on stock exchanges by broker-dealers. Individual investors typically do not have direct access to these exchanges, but they can participate in buying and selling stocks if they have an account with a brokerage firm. There are three primary types of investment brokerage firms -- full-service brokerage firms, discount brokerage firms and online brokerage firms. Full-service firms typically provide the greatest level of customer service, and investors usually have an individual investments broker assigned to their account. Investors pay the highest commissions for stock purchases placed through full-service firms. Discount brokerage firms provide limited service, but they allow investors to make stock purchases at a discounted commission rate. Online brokerage firms typically provide little personal service, but offer the lowest costs per trade. There is no standard commission cost. Each firm determines the rate it charges.
  
  

Initial Account Funding

• Investors must open a brokerage account with an investment brokerage firm to use its services to execute stock purchases. Most brokerage firms require investors to fund their accounts with an initial deposit before any stock trades can be executed. There is no standard initial funding amount required by all brokerage firms. Some require investors to deposit $2,000 or more, while others only require the investor to deposit enough to cover her initial order.
  
  

Direct Stock Purchase

• Some corporations allow investors to purchase stock from the company through a direct stock purchase plan. These plans may have a minimal initial set-up cost or enrollment fee. Investors may make small one-time or irregular investments, or the company may allow investors to set up an automatic monthly investment of even smaller amounts. The company pools all funds from all investors and makes a single stock purchase on a regular basis, which could be once per week or once per month. The stock is then divided among all investors on a pro rata basis. The company typically pays all brokerage fees and commissions. For example, the Kellogg Direct stock purchase plan requires a $10 enrollment fee and an initial investment of $50, but reduces that amount to $25 for monthly investment plans.
  
  

Automatic Investment Programs

• Some online brokerage firms allow investors to participate in automatic investment programs that have significantly reduced trading fees with no account minimums. These programs allow the investor to invest a specific amount of money that the investor designates on a regular basis. The investment firm pools all funds from all investors in the same stock, then divides the purchase among the investors on a pro rata basis. The investor may receive partial shares of stock, rather than having to buy full shares as required by many full-service brokerage firms. The cost of buying stock through these firms may be as little as $1 per trade, plus the cost of the stock.