In the United States and the UK, stock brokerage firms are regulated agencies which buy and sell shares and securities on behalf of clients, in hopes of making a profit. In return for acting as agent, clients pay stock brokerage firms a commission and fees. The price of company shares, or stocks, depends largely on the economy, the political climate, and the law of supply and demand. When goods are plentiful, stocks, which represent the amount of shares or interest owned by shareholders in companies which manufacture those goods, are sold at a lower price. And when there is a shortage of goods, prices of stocks can skyrocket, simply because a shortage of goods increases demand. A stock’s value varies according to the net profit companies which sell shares in their companies earn. When corporations realize a net profit, then stocks increase in value; however when those same businesses experience closures, mergers, takeovers, and bankruptcies, stocks plummet in value; and investors lose money, sometimes the entire principal investment. “When goods increase, they are increased that eat them: and what good is there to the owners thereof, saving the beholding of them with their eyes?” (Ecclesiastes 5:11).
In a woeful economy, a greater number of companies fail; and the result is a volatile market with stocks fluctuating wildly from day to day. Stock brokerage firms face a formidable challenge trading on an unstable market and accurately interpreting economic indicators. In what is termed “a bear market,” the public’s perception about the ability of major corporations to bounce back from banking mergers and closures and government buyouts also has a negative influence on stock prices; as consumers and lenders tighten the purse strings. Even when the Federal Reserve Bank lowers interest rates to try to increase banks’ lending power and encourage consumer spending, uncertainty and fear can freeze money and adversely affect markets. Conversely, in a “bull market,” when the economy experiences burgeoning growth, businesses thrive; and consumers and lenders loosen the purse strings. Money flows into the system and corporations begin to realize a profit, boosting the value of shares and stocks; and everyone wins. Stock brokerage firms play a large and important role in accurately gauging markets to make wise trading decisions, reassuring nervous investors during a bear market, and celebrating higher returns with clients when markets are bullish. “In the day of prosperity be joyful, but in the day of adversity consider: God also hath set the one over against the other, to the end that man should find nothing after him” (Ecclesiastes 7:14).
Stock brokerage firms were established primarily because individuals were prohibited from buying and selling on the stock exchange. Investors opened accounts with brokers in order to start trading. Investors could either self-direct their accounts by directing brokers what type of shares to buy or sell; or brokers could advise investors on trading based on a professional assessment of market trends, although clients had the final say. In what is called as “discretionary dealing,” clients leave the decision to buy or sell solely up to the broker. Stock brokerage firms are highly adept at analyzing trends and studying market makers, those firms and traders who earn a reputation for making the best profits in trade. Brokers are keen strategists and are highly trained to assess the supply and demand for commodities, such as oil, gas, and wheat, or precious metals, such as gold, platinum and silver. By studying the market, brokers are able to advise investors about the best time to buy or sell to make a profit. Investors may choose to buy stocks at a low price and hold onto them until the value increases. Brokers also help investors choose the best products to diversify portfolios and maximize investments for the highest returns at the least risk. “For wisdom is a defence, and money is a defence: but the excellency of knowledge is, that wisdom giveth life to them that have it” (Ecclesiastes 7:12).
The advent of the Internet transformed how investors trade stocks. Instead of shopping for stock brokerage firms and developing a client-broker relationship, investors could place orders to buy or sell online through bargain basement brokerage companies without ever meeting agents face to face. Electronic ordering, or what became known as E-trading, brought stock market trading to the man on the street’s front door, as Wall Street became accessible through the average consumer’s home or office PC. E-trading spawned a greater interest in the markets, especially by day traders, investors who place orders to buy or sell stocks at prices that are good for just one day. At the close of the day, the order expires and investors either have made a profit or suffered a loss, in the event that the stock sells for less than the amount invested.
In spite of E-trading, crucial to the success of market trading for the serious investor or high roller is the professional expertise of reputable stock brokers. The stock market is not a game that anyone can play and expect to come out a winner. The intricacies of buying and selling commodities or precious metals on the global market is not for the weak at heart or mind; but reliance on a strong, knowledgeable brokerage firm can pay off handsomely. A brokerage’s knowledge of market trends and application of strategic buying practices to take advantage of undervalued stocks and select products to diversify client portfolios makes stock brokerage firms indispensable assets to individual investors and domestic and foreign markets. Without their expertise and enduring bravado, even in the face of a waning economy and volatile markets, investors would be left to maneuver through the choppy seas of economic uncertainty without hope for a better tomorrow.