Moorman and Company

Too many of us have a vague, almost uneasy idea of how stocks are traded. Sometimes we get the feeling that the stock market is an extremely complex arrangement. In fact, a stock is traded in much the same way that real estate and insurance are bought and sold. That is, a network of men and women in New York and throughout the country form a link between someone who wants to buy and someone who wants to sell.

Competent brokers are necessary in most investment related fields, and finding a good stock broker is just as vital as choosing a real estate or an insurance broker. In a real estate transaction, you can see the land, the buildings, or the architect's plans and renderings. When purchasing a life insurance policy, there are a limited number of variables. But in the world of stocks there are potentially thousands of variables.

When you "buy stock", you are purchasing a share in the ownership of a corporation. All you may have to look at are the company's annual report and the position listing on your monthly brokerage account statement. So, how do you decide which stocks to buy?

You can begin by reading a financial periodical like the Wall Street Journal. You can study Standard & Poor's Corporation Guide to get an independent rating of the financial strengths of various companies. You can even watch Wall Street Week on television. But these sources provide a limited amount of information.

In order to find out as much as possible about the companies in which you plan to invest, it is essential that you be able to look beyond those sources. But unless you have the time, skill and desire to perform that kind of in-depth research, the only way you can intelligently invest in the stock market is through a broker who knows about the companies represented on the market.

There are three basic types of stock brokers and each serves a different purpose and a different type of investor.

The Order Taker. There are some investors who are extremely knowledgeable in the market and are confident in their stock choices. They need the services of an Order Taking Broker such as those found at a discount brokerage house. An Order Taking Broker's contribution to the relationship is the efficient execution of a purchase or a sale. This broker buys and sells as directed and provides statements to the principal. He or she offers no advice, no suggestions and no contradictions to the investor.

The Trader. This type of broker doesn't really have customers so much as fellow riders on the ticker tape roller coaster. The Trader doesn't invest in companies; he or she buys and sells on the short (hourly, daily, weekly) moves of stocks. A Trader can be defined as one who trades on position within 30 days. This broker is not for the beginning investor.

The Advisor. Initially, this type of broker may not even discuss stocks and the stock market with you. Instead, he or she will ask questions designed to find out all about you. Your answers allow the broker to define two essential things: your basic investment policy and your personal financial goals. This type of broker then translates your basic policy into stock market activity in order to enable you to reach your goals.

The Advisory Broker is the best choice for the beginning investor. Typically this type of broker researches and actively follows a number of companies. Additionally, most large brokerage firms employ market analysts who specialize in certain segments of the market. Their research enhances the Advisory Broker's ability to recommend stocks and mutual funds that meet your investment profile.

But how is a stock bought or sold? The New York Stock Exchange resides in a large building at the corner of Wall and Broad Streets in the heart of the New York City financial district. On its trading floor are anywhere from eighty to one hundred trading posts. All buying and selling of a particular stock is done by the members of the exchange around the outside of one of these horseshoe shaped trading posts.

It's because most of us can't get on the phone and place an order directly with a member on the floor of the exchange that we need to use a stock broker. The type of broker you choose to make a part of your investment team will be governed by your knowledge and experience.