As a beginner buying the right stocks is always a tricky job. As you lack experience, chances are the stock you buy might see a huge price drop and you lose all your money invested
For some expert advice and other necessities, we often start our trading journey with stock brokers. They give us valuable advice on when you buy your shares and when to sell them.
But did you know, not all stock brokers are not good at all? Choosing the wrong stock broker may lead you to various financial losses. Also, if your broker is not reputed as an expert, you can face
Various other problems too.
However, in this article, we will give some key factors to look for when you are choosing a broker for stock trading.
But before that, let’s understand
Who is a stockbroker and what does he do?
Stock brokers are actually stock market professionals who work as a mediator between the share buyers and the stock market. They play a big role in the whole share market system. Without them, you cannot buy or sell your shares.
Stockbrokers have deep knowledge of the market and they have the license to do so. In India, there is a regulatory authority named SEBI, which controls both share markets BSE and NSE in India.
Stock brokers are under the SEBI’s terms and conditions. When any buyer makes a request to sell shares, the stock broker takes that request to the stock exchanges. After that, they match the request with the new buyer. After the completion of sales, the fund is settled to the seller’s reading account, and the new buyer receives those shares in their demat account.
In exchange, brokers charge a commission on each buying and selling of shares.
As there are various types of stocks available on the stock market, there are different types of stock brokers too. Depending on your requirement, you can pick one. So, let’s see the,
Types of brokers in the stock market:
There are different types of brokers in the stock market who offer various services and charge different fees. Some of the common types of brokers are,
Full-service brokers:
These brokers provide a wide range of services, such as investment advice, portfolio management, research, tax planning, and more. They also have access to exclusive products and opportunities that may not be available to other brokers. However, they charge higher commissions and fees than other types of brokers.
Discount brokers:
These brokers offer low-cost trading services, such as executing orders, providing basic tools and platforms, and sometimes offering research and education. They do not provide any investment advice or portfolio management. They are suitable for investors who are confident in their own decisions and want to save on fees.
Online brokers:
These brokers operate through online platforms or apps, allowing investors to trade anytime and anywhere. They offer similar services as discount brokers but with more convenience and flexibility. They may also offer additional features, such as robo-advisors, social trading, or fractional shares. They usually charge low or no commissions, but may have other fees or limitations.
Hybrid brokers:
These brokers combine the features of full-service and discount brokers, offering both personalized advice and low-cost trading. They may use technology to automate some aspects of their services, such as portfolio rebalancing, risk management, or tax optimization. They are suitable for investors who want a balance between guidance and control over their investments.
Most stockbrokers work on behalf of brokerage firms but still, there are many reasons, you should choose your stock broker after looking at certain factors.
Below are mentioning key factors, you should keep your eye on while choosing a stock broker for you.
Account opening charge:
When you have decided to start investing in stock markets, you must have a demat account and eventually, you have to contact a brokerage firm for that. As mentioned earlier, brokers work for brokerage firms mainly. So, before opening a demat account, be conscious of their charges. The charges might be from zero to anything. Depending on the platform you have chosen, the price range depends on the company you have chosen.
Broker commission:
Each time you buy or sell shares, there is a fixed brokerage charge that you need to pay. Some brokers charge higher rates that might not be suitable for everyone. So, when you are choosing your stock broker, get clear information about the brokerage charges.
Many brokers who offer cheap brokerage charges often charge a fixed amount on every trade. It is very important to understand the whole thing in detail otherwise, you might lose your profits by paying brokerage charges or commissions.
Trustworthiness:
Another big aspect that you should look for whether you are a newbie or an experienced investor, is the broker’s trustworthiness. It is a vital point you should check. Even if you are searching for a big and reputed company, you cannot get enough information about it. When you invest in a stock, the stockbroker has the biggest influence on you. Their team does the research on whether the company whose shares you are going to buy has the potential to grow in the future or not. If you blindly trust them and they do some unfair practices, you will face severe losses.
Communication support:
Support is a fundamental point. Once you join a brokerage firm, you have to contact them for various reasons. To discuss buying and selling decisions. If a new investment opportunity has come and more. Now, you have to look, at how good their support is. A good brokerage company offers support through various mediums.
Also, you need to see if their support is available in your understandable language. Just because a broker is doing their job for a while does not mean their support is up to the market and helpful. Many companies offer great support, while others are not enough.
There are many platforms on the internet where people share their experiences with these companies. You can search their reviews there too.
Knowledge base:
A good stock brokerage platform will have huge resources to help you gain knowledge of the share market. They usually have a knowledge base where you will find much information that is important for you to know before you enter.
Platform interface:
Another major point that is needed to examine is the interface of the brokerage firm. Now, we all do trading kinds of stuff with our mobile devices and with desktops and other smart devices. Be it buying and selling the stocks their interface plays a main role. You have to understand the interface easy to understand and navigate otherwise, you will face troubles. So, check their interface demo before you put your bet. You can search videos on YouTube for a better understanding.
Check additional facilities:
The share market is not only about buying and selling stocks. There are numerous investment options available. For example, Mutual Funds, buying digital gold, and many other things. If you are looking to invest for long-term visions these options are quite lucrative but, not all stock brokers offer these additional facilities. For example, Paytm, which is the most popular online wallet application launched its brokerage facility and they offer these additional options too. So, this point must be observed before you choose your stock broker.
Now, in that context, a query often comes to the new investor’s mind, what will happen to their shares if their stockbroker shuts down?
Well, the answer is simple. All the shares you have bought are kept in your demat account or dematerialized account. Those shares reside in electronic form at the Central Depository Services (India) Limited (CDSL) and the National Securities Depository Limited (NSDL).
As you buy shares with the help of a share market stock broker, which also, allows you to open your demat and trading account, it is obvious to come to mind what if your stock broker shuts down?
Many new investors have this query.
What will happen to your Demat or trading account then?
The answer is nothing will happen to your shares and securities as your broker does not have the right to access your investments without your consent. The chances are very low for a shutdown but, in case, any company does so, all your assets are secured digitally to your demat account.
You just have to submit a request to regulatory authorities.
Final words:
There are no certain reasons to think that you have to stick with your first stock broker no matter what happens. If you find something wrong with your broker you can come up anytime but the process is not hassle-free anyway. So, before you choose your stock broker, you need to look eye on these points.
Thanks for reading. You can explore more similar content.
- How To Invest In The Share Market? Excellent Tips For Beginners.
- What Is Forex Trading? Everything You Need To Know As A Beginner.
- What is an Initial Public Offering (IPO)In Stock Market?
