What is a “Broker”?
You must have listened to the term Stockbroker a lot of time and now when you have already talked about Share Market it’s time to understand the term Broker. Who is Stockbroker, as the name suggest a stockbroker is a professional or an organization that acts as an agent or middleman in the stock market that enables the buyer or seller to sell or buy shares? They usually charge some fees on every trade which they done on behalf of you. If you are getting started investing money in the share market and you are new to the market, the broker can be a great asset for you to connect with the market.
They can enable you to purchase stocks and other securities on stock market. Since they have the good knowledge of market, it is always advisable to work with them.
For the purpose of this session, we will deep dive into the tips on working with a broker and see how brokers impact our portfolio. Having a broker is a crucial part of investing. Being a new player in the market, you would someone to make your trades within the stock market. Gradually you will understand various order types and various advantages & disadvantages of those but if you are new to investing, you may want to start with a broker who can help you to manage your portfolio.
Nowadays you may refer to various websites and online broker companies that give you a platform to buy or sell shares by yourself. That too in a very user friendly environment but while those markets are much easier to access these days but being a new player means that you still need a broker to act as an agent to facilitate your trade, and that is what exactly stockbrokers do for you. Brokers play a very vital role for the investors and they go well beyond the standard’s intermediary role. They often advise you which stock is better to buy or sell and what is the best time to buy or sell, they also let you know the risk of trading in various shares and they can also help in improving your portfolio by adding and subtracting the shares of the best company.
There are few tips for working with a Broker:
Working with a broker gets easier after every trade you execute with them. With the passage of time you will understand that paying nominal fees to brokers is actually a worth to pay.
- Lay the groundwork
- Meet multiple brokers
- Figure out your strategy and discuss with broker
- Avoid brokers who recommend high commission on trading
- Ask for a commission schedule
- Check the fine print
Also, you should select a reputed stockbroker for trading and investing because choosing the right stockbroker leads you halfway to successful investing.
There are two types of brokers, based on the types of clients they cater to and are usually classified into two distinct categories:
- Institutional Stockbrokers – Institutional Stockbrokers have large institutions and companies as their clients and trade in securities on behalf of them. They offer services such as investment banking, securities services (IPO or secondary offerings), advisory services, and brokerage services to institutional investors.
- Personal Stockbrokers – Personal stockbrokers offer investment banking, advisory services and brokerage services to small businesses and individual investors.
You can also see some services offered by a stockbroker, apart from facilitating the buying and selling of stocks from the stock market, stockbrokers also offer a gamut of services to their clients such as:
- Advisory Services – Stock Market brokers possess expertise related to the working of stock market, performance of stocks, market trends, and so on. Besides, they have access to the data base and research findings of brokerage firms that they are associated with. Hence, they can provide excellent investment advice to their clients.
- Limited banking services – Stock market brokers are authorized to provide limited banking services such as interest-bearing accounts, electronic deposits, and withdrawals. The clients can avail such banking-related services from the stockbrokers by paying them a nominal brokerage charge.
- Other Investments – Apart from stocks, many stockbrokers also deal in other securities such as mutual funds, bonds, exchange traded funds, futures, options, and commodity trading. They also provide investment advice related to all these products, to their clients.
Want to learn more about cryptos? There’s a lot to learn. Learn cryptocurrency, blockchains, algorithmic trading, financial analysis, algorithmic trading, the stock market, and more in The Complete Python for Finance: Learn to Trade in 99 Days.