Choosing a Broker
Posted on | August 1, 2009 | No Comments
How to select a broker
Depending on the type of investing that you plan to do, you might need to hire a broker to handle your investments for you. Brokers work for brokerage houses and have the capability to purchase and sell stock on the stock exchange. You might wonder if you really need a broker. The answer is yes. If you intend to purchase or sell stocks on the stock exchange, you must have a broker.
Stockbrokers are required to pass two different tests in order to obtain their license. These tests are very difficult, and most brokers have a background in business or finance, with a Bachelors or Masters Degree.
It is very important to comprehend the difference between a broker and a stock market analyst. An analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform. A stock broker is only there to follow your instructions to either purchase or sell stock… not to examine stocks.
Brokers acquire their money from commissions on income in most cases. When you teach your broker to purchase or sell a stock, they acquire a set percentage of the transaction. Many brokers charge a flat ‘per transaction’ fee.
There are two types of brokers: Full service brokers and discount brokers. Full service brokers can usually offer more types of investments, might wage you with investment advice, and is usually paid in commissions.
Discount brokers typically do not offer any advice and do no research – they just do as you ask them to do, without all of the bells and whistles.
So, the biggest decision you must make when it come to brokers is whether you want a full service broker or a discount broker.
If you are new to investing, you might need to go with a full service broker to ensure that you are making wise investments. They can offer you the skill that you demand at this point. However, if you are already knowledgeable about the stock market, all you really need is a discount broker to make your trades for you.
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