Can You Buy Stocks in Any Company?
The stock market is a place for many types of investors, including risk takers and careful investors looking to diversify their holdings. While not all stocks represent the same kind of risk or value, investors generally have a choice to invest in any company that makes its shares publicly available on a stock exchange.
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The Open Market
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The stock market as a whole, and individual stock exchanges that handle transactions for brokers and businesses, rely on the economic concept of the open market to set stock prices. Stock is sold on an open market because anyone can choose to participate in the process by buying or selling shares. Businesses are part of this process, carefully choosing when to offer an initial public offering and when to buy back shares of their own company. Stockholders sell their shares for fair market value, which is the price determined by what buyers are willing to pay and what other sellers are willing to accept. Special restrictions on who can buy stock and in what companies would lead to a closed market system and change the stock market in a fundamental way.
Ways to Buy Stock
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Once you select a company to buy stock in, you can go about doing so in one of several ways. Some companies sell their stock directly to investors. Most, however, require buyers to go through stock brokers, who place orders on the exchange where the company's stock is sold. Another option is an online broker, which is a service that allows you to place orders quickly from any computer with Internet access. Fees vary for brokers and online brokers, as does the amount of time that it takes to process an order.
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Insider Trading
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The term insider trading refers to buying stock in a company in which you serve as an employee, executive or adviser. You can buy stock in a company that you work for, and you might even receive special incentive to do so from your employer in the form of stock options. However, insider trading is illegal when you have special knowledge of the company that isn't available to the public and might affect stock prices in the future. For example, if you're working on a secretive new product that your company plans to introduce in the coming months, it is illegal for you to buy stock in your own company to profit from your special knowledge of that product. However, once the product is released, you are free to buy stock in your own company as long as you don't have any new exclusive knowledge.
Competitors
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You may feel as though it's ethically wrong to purchase stock in a company that you or your business competes with. However, this isn't necessarily the case, and it provides no legal roadblock to your buying stock from a competitor. While purchasing stock in a competitor in a large quantity might contribute to an increase in the company's value due to an increase in demand and a reduction of supply, in most cases one investor's decision will have a minimal impact. At the same time, owning stock in your competitor gives you a vote at its annual shareholder meeting and access to financial reports that you may find useful in gauging the level and plans for the future of your competition.
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