Financial Answer Center

Before mutual funds came along, investors wanting to invest in a company had to buy shares of stock in that company. The value of the investment was dependent upon the performance of that one company.

Given the high price of more established, blue-chip stocks, average investors with limited funds buying individual stocks are typically limited to investing in a handful of companies. Because you own shares of stock in only a few companies, your risk is higher than if you owned the shares of many companies.

To purchase individual stocks, you need to open a brokerage account. Full service brokers typically charge commissions, but provide you with more research and information, and are appropriate for investors who desire professional assistance. Discount brokers charge you less but you need to know what stock you want to buy or sell—they are not going to give you advice. Some stocks can be bought directly from the company itself through a dividend reinvestment plan.