Are you interested in investing in the stock market but do not know how to choose the right stockbroker for the task? Keep on reading the article below to learn everything about stockbrokers.
What is a Stockbroker?
A stockbroker is an individual or a company that serves as an intermediary party between the stock buyer and seller. Since investors cannot purchase into the stock market, stockbrokers execute the retail investors’ investment decision on their behalf. They can offer their services across a number of different asset classes, including stocks, forex, real estate and insurance and charge a commission for the order executed.
What does a stockbroker do?
Unlike the investment analyst, a stockbroker is a professional that buy or sell orders on behalf of a client. They are responsible for executing and implementing the client’s investment decision and do not indulge in investing on behalf of the client.
Types of Stockbrokers in India
Full-service broker: These types of brokers are also the financial advisors and offer an array of services such as retirement and investment planning, tax advice and research. Owing to their extensive range of services, they charge a considerably higher amount for their services from their clients as opposed to the other types of brokers.
Discount broker: Discount brokers do not indulge in assisting their clients in their investment choices with the help of research and planning of their trade or provide financial advice to the same. They solely undertake the task of executing the investment decision of their clients. They charge a considerably lower commission from their client owing to their limited service offers. Besides, the commission tends to decline further once the client involves themselves on more such trades with the same discount broker.
Criteria for choosing the right stockbroker
Understand your service need: It is imperative for choosing the right stockbroker that the investor clearly define their service need before appointing a stockbroker. If an investor is confident enough to make their investment decision and would not require professional financial advice, then they might choose to opt for a discount stockbroker or vice versa. However, financial advisors that further serve as a full-time stockbroker can help the investors to make the well-informed and well-weighed investment decisions.
Customer review: Similar to every other service, a stockbroker with a justifiable record of happy customers are worth hiring. As happy customer translates to efficient service providing the ability of the broker.
Experience and expertise: A stockbroker who has been in the industry for a considerable amount of time is sure to gain a substantial measure of experience and expertise in the field. As such, the longer a stockbroker has been in the market, the more reliable will they be.
Services offered: Analyze the range of services offered by the broker apart from the standard services offered by regular brokers. A broker that fits your service requirements as per your budget should be the right broker for you.
Brokerage and other charges: Costs of buying, selling, and holding stocks and other securities through a broker along with the commission for executing investments in the stock market should be taken in account while selecting a stockbroker. Besides, the investor should compare all these costs along with the margin interest and other service charges of one broker with the others in the market.
Hence, are the most basic steps for choosing the right stock broker for your stock market investments.
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