A brokerage is a firm that acts as an intermediary between buyers and sellers of securities.
Understanding Brokers
Brokerages provide a number of services to their clients, including executing buy and sell orders for stocks, bonds, and other securities, as well as providing investment advice and offering a range of investment products. Brokerages earn money by charging their clients fees for the services they provide. Some of the most well-known brokerages include Charles Schwab, E*TRADE, and Fidelity.
1. An investor wants to buy shares of XYZ Corporation, so they contact a broker and place an order to buy 100 shares of XYZ stock at the current market price.
2. The broker receives the order and searches for a seller of XYZ stock who is willing to sell at the price the investor is willing to pay.
3. Once the broker has found a seller, they execute the trade by matching the buy and sell orders and facilitating the transfer of the shares from the seller to the buyer.
4. The broker then charges the investor a fee for their services, which may be a flat fee or a percentage of the total value of the trade.
5. The investor now owns 100 shares of XYZ stock, which they can hold onto as a long-term investment or sell at a later date if they choose.
This information is educational only and not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Information is from sources deemed reliable on the date of publication, but Stock Events does not guarantee its accuracy.
