There are basically two ways in which an investor can put his or her money in the stock market and they are…

• By opening an account with a stock broking firm (decision based on advice)
• By buying bonds or funds and investing indirectly.

Here we will investigate both of them and try to find out what is the best way of stock trading.

Opening An Account With A Stock Broking Firm

A stock broking firm is a company whose business is to invest in stocks and manage the portfolios of their clients. This is basically done in two ways – the firm opens the account for the client and supplies advice and daily tips and the investor takes his or her own decisions. Or the investor may decide to put in a definite amount of money and the firm might have promised a certain percentage of return after a year. In the second case, any margin for the firm (after paying the return to the client of course) is its profit and in the first case, the company just earns the brokerage.

Investing In The Market By Buying Bonds And Funds

This is the indirect way of investing in the market. In these cases, the investor of course puts in his/her money, but it is done not to any particular stock, but to a bond or a fund. There are fund managers who have a team and they decide where to put the collective money of all investors who have purchased this. Of course the funds are not put into just 1 or 2 stock, rather, it is put into many of them across industries. These decisions are made depending on various factors.

As the investor you can primarily choose from 3 kinds of bonds or funds and they are “High Growth”, “Mid Growth” and “Low Growth”. In the High Growth funds, the money is put into relatively risky segments of the market and thus the returns can be very high – but the risks are high too. Low Growth funds are just the opposite of this. Mid Growth funds or Balanced funds are where the right mix is attained to consider the investors security first and then return.

If you are not an expert in stock trading, it would probably be better for you to go with bonds and funds while you are still learning. Then perhaps when you have enough experience, you may want to directly select stocks and put your money in them.

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