The brokers might also provide valuable advice to their clients on which shares to buy but generally leave the ultimate decision on the investors. They also help in creating a robust portfolio for their clients and conduct all dealing decisions on the client’s behalf. There are two categories of brokers: full service brokers and discount brokers.
Full service brokers offer exclusive advise to their clients but charge a premium for the service provided. These full service brokers usually maintain a proactive role and manage your portfolio and all transaction related formalities. They have a team of experienced and qualified researchers acting behind the scene to aid their customers. Discount brokers on the other hand are available at much cheaper rates but they do not provide the personalized guidance or landholding, which you would get from a full service broker.
Most of the brokerage houses are faceless organizations placing trades on your behalf as per your instructions. Whether you should go for a discount broker or a full service broker would depend on what you need from your broker. In case you are knowledgeable enough and have enough confidence to manage your own portfolio and take decisions on your stock pick then it is better to go for discount brokers.
Some of the points that you need to keep in mind while choosing the right and the most suitable broker for yourself are the real commission rates of your broker, consideration and transparency regarding extra charges if any, facility of trading multiple markets, interest payment on uninvested cash in your brokerage account, amount needed to start a deposit, reliability of the brokerage firm and the quality and standard of the automated features they provide.
Most online discount brokers charge something between $10 and $40 per trade, which can go up to $100 per trade in case of a full service broker. Remember to negotiate the rates because most brokerage firms would be willing to cut down on the advertised rates depending on the volume of business that you are running through their account. Beware of the hidden fees most brokerage houses charge that can push up your cost per trade resulting in lower profit margins. These hidden fees can be in the form of charges for transferring funds, insurance, administration charges, late payment penalties, inactivity charges, low minimum balance charges and so on.
As your need and business grows, you might want to trade in multiple markets. Keeping this in mind, you should go for a broker that can provide these kinds of facilities. Also know the commission rates they charge for this facility. Brokers may pay you interest on your uninvested cash in the brokerage account to the tune of 3 to 4% that might come in as a nice little bonus for you. So be sure that your broker gives you this facility before finalizing.
Some brokerage houses specify a large minimum deposit to start an account. Generally speaking, full service brokerages need a larger deposit compared to a discount brokerage. This amount can be as high as $50,000 for some brokerage firms, which is somewhat high in case you are a beginner. So choose a brokerage house with reasonable deposit amount.
Success of online trading depends to a large extent on the speed and reliability of execution of orders. Choose a brokerage house that is fast and reliable. A momentary delay in order placing might result in substantial losses. Also while opting for a broker check if they provide the state-of-the-art technologies that might make your life as an investor a lot easier. For example, features like automated stop losses might protect you from suffering huge losses, minimizing your risks. Features like contingent order might enable you to place certain conditions before an order in automatically placed.
An effective means of choosing the best broker for yourself would be to go by your friend’s recommendations. Some other criteria to check for would be their past performance history and the years of business they are into. It would also be a good idea to personally call up each of the few brokerage firms that you have short-listed, checking out their response time, quality of service and promptness, eagerness and willing to serve their customers.
SogoTrade stock broker: trading options
SogoTrade is now on Squidoo:
Investment stock market
You must log in to post a comment.