Buying Investments on the Foreign and Domestic Stock Markets

What is a stock market?  An exchange used to buy and sell investments  Investments on this market exchange are purchased by brokerage firms and large institutions  Not all companies are listed on a stock exchange  Not all items may be affordable or easily accessible to the public  The general public may purchase investments through licensed individuals or brokerage firms

Stocks  Stocks are investments products that can be issued and sold to the public by both existing and new companies  Older companies sometimes offer new stock to raise money for expansion projects  New companies issue stock when they are ready to go public. These shares are often referred to as an IPO’s or Initial Public Offering Shares  Typically this type of investment offers no guarantee or return on your investment. Meaning that if you purchase a stock for $1 it could go down to.01

Bonds  Bonds are used by corporations, institutions and even states to raise money for expansion, equipment even schools  Bonds are considered a debt instruments and represent a small ownership in a company  Bond owners expect a return of principle as well as interest payments on their investments, this is considered a loan  If a company fails or even if they file for bankruptcy; bill collectors and bond owners expect to be paid back first.

How do we purchase domestic investments?  Most consumers purchase investments from a brokerage firm. This is an organization that acts as a intermediary between a seller and a buyer, they earn a small markup on each share sold.  Investors may also choose to use an investment advisor; this is a person who gets paid a flat fee based on how much your account has grown but does not earn money on each buy or sell. They generally require a minimum account balance and collect fees at least semi annually.  Some consumers choose to invest independently online using research tools and software provided through firms like E*TRADE or Scottrade. These types of institutions charge consumers a small fee for each purchase made and for the use of research tools.

How do we to purchase foreign investments and what can we buy? Foreign and Domestic Brokerage Firms Foreign investments may be purchased directly through brokerage firms. Many consumers find these types of investments very enticing because they may offer above average returns and earning at a reduced tax rate. Unfortunately, consumers often find that types of investment opportunities are hard to obtain and can be very difficult to sell once they own them. Global Mutual Fund An mutual fund company is an institution that buys investments pools them together in a basket then buys and sells shares of this basket to consumers for a small profit. In the case of overseas stocks, the consumer does not actually own the stocks but shares ownership in the pooled investments. Consumers can easily sell shares back to the fund company. American Depositary Receipt A certificate issued by a U.S. bank that represents one or more shares of an underlying foreign stock. ADR investments are easy to sell back to the bank because you do not actually own the foreign stock you own an interest in the certificate.

Best Practices in any market  Only do business with someone you fully trust  Always ask questions regarding the back ground of anyone who expects to be paid.  Verify that professionals are licensed to sell investments in your state and that they have a clean professional record.  Don’t feel pressured to make a decision right away.  Always make decisions based on your comfort level and personal investment objectives.  Remember that it’s your money, and your decision