This is a guest post by British Solomon, he is a contributing writer and media specialist for Market Realist.
What is a stockbroker and what do they do for you?
A stockbroker is a sales agent who works in the stock market where shares are traded. They help their clients maximize their profits and minimize any loss in the stock market. A stockbroker can either be an individual or an organization with a license to act on behalf of clients in the security market. In a nutshell, a stockbroker buys for the buyer and sells for the seller in each case ensuring that the best prices are obtained on behalf of the client.
Roles of Stock Brokers
Apart from buying and selling stocks, there are other roles which a stockbroker can perform. They can provide banking services such as fixed and variable interest-bearing accounts, direct deposits and credit cards.
Stockbrokers utilize research as the foundation of their advice offered to clients. The research on accounting, economic and technical analysis which are used by their clients to decide on which stock to buy or when it is the right time to sell stock in order not to experience unnecessary losses.
They assess risks in concern with buying and selling since there is variation in price per second and at this point, a broker’s mathematical prowess in analyzing financial data is the advantage. Such things help in establishing trends in the security market which is a necessity in the advising of buyer-seller patterns.
Tips on Choosing the Right Broker for you
- First, determine whether you want a discount or a full-service broker. Full-service stockbrokers are also called advisory brokers and are the most expensive type of brokers. Apart from buying and selling, full-service brokers offer extra services such as help with services, investment decisions and helping clients achieve their investment goals in the security market.Discount brokers, on the other hand, are execution-only brokers or non-advisory brokers hence making them cheaper than advisory brokers. Therefore, these kinds of brokers are well suited for those who have experience in the security market.
- How involved will you be with the oversite of your portfolio? Will you be hands on with your investments or letting your broker take the lead? Depending on your answer, you would need a broker who is easily accessible. A stockbroker is required to be available at any time since there are more hectic trading days than others. Therefore, a broker who is available when the market is open.
- Take time to shop around for the best stock brokers. Making a rushed decision can leave lasting impacts on your finances, that may take years for your complete recover. You need the best vehicle for your investment money to maximize your profit.
- Get recommendations from colleagues on good brokers. Best way to find a good broker is to get one recommended to you from a trusted source. Ask around to find out which brokers other people are using and the reason as to why they selected those specific brokers.
- Check reviews and licensing. You need to choose a broker who has your best interest at heart rather than one who pushes you towards investments that only fetch them more commissions. Have information on the broker’s background and strategy. This includes checking whether they are adequately licensed alongside knowing their depths of experience.
- Know your investment goals and strategies. Lastly, choosing a broker will be a lot easier if you know the goals or investment strategies you would like to use. It is important to be on the same page as your broker to get the maximum out of your investments. Are you someone who likes to play it safe, or willing to invest in startups? Get to know how they view investing and what they consider before making an investment or buying stock, such as, the stability of the stock or its past trends.
Other things to Consider
Online Brokers vs. Traditional Brokers
Choosing between an online or traditional broker all depends on your personal needs as a client. Online brokers have offered a trading platform for a client as their primary goal, but provide minimal customer service. Traditional brokers provide personalized services they may be taking your phone call placing trades for you while at the same time offering investment options and ideas.
Total Costs and Brokers fees
This is the amount a broker charges to execute transactions or for particular services they can charge for financial services, insurance, delivery services or margin trading. The cost varies depending on the market traded or the type of broker.
Online brokers have the least brokerage fees since their key role is to allow customers to conduct trading with limited customer services. Since full-service brokers offer the full range of services ranging from real estate planning to tax consultation, they charge and earn the most significant brokers fees.
British Solomon is a contributing writer and media specialist for Market Realist. She regularly produces content for a variety of economics and investing blogs. Market Realist is also on Twitter @MarketRealist.