The role of the stockbroker
Beginner Stock Market Investing
As with accountants and lawyers, people tend to regard stockbrokers with a great deal of suspicion because of their access to knowledge that you simply do not possess. However, whether you like them or not, you will have to suffer them as a necessary evil in the business of trading stocks because they are your link to the stock market. The advances in technology and the spread of the Internet have made it easier for you to take control of your stock trading but you still cannot dispense with the services of a broker where you’re buying or selling stock. As with many other professions, there are brokers who will take advantage of your ignorance to make money out of you especially you rely on their advice. Having said this, there are many fine brokers who deliver an outstanding level of service to their customers and play a key role in their trading success. If you spend a little time and trouble in selecting the right broker, your homework is bound to pay off handsomely.
The stockbroker serves as the intermediary between the stock markets and the investors who want to buy and sell stocks. It is not possible for an investor to trade directly on the stock markets and the broker that you use may either be a single individual or part of a giant investment firm such as Merrill Lynch. To start trading, you will need to open an account with a stockbroker and the requirements very from broker to broker. For instance, the initial deposit could be anything between $500 and $2500 so there are an increasing number of online brokerages who will open an account for you with little or no initial deposit. If you want to avoid brokers and the associated costs, you should try dividend reinvestment plans where you can buy stock cheaply directly from the company.
Naturally, brokers charge for their services and the charges called a commission. The amount that the broker charges is a reflection of the services that are offered so that cheap brokers tend to offer minimal services. Often all you can expect for a commission of $5-$15 is the execution of your trade. The main range brokers who charge between $15 and $30 will add a few services to the execution such as advisory services. The expensive brokers known as full-service brokers could charge up to $200 per transaction but offer a comprehensive range of advisory and management services. In addition to these commission costs, brokers will charge any fees with which they think they can get away. Look for charges such as transfer of assets, account maintenance fees, interest on margins and so on. Shop around to get the best possible deal for yourself.
The Internet has changed the face of stock trading and online trading has made trading more affordable for the average investor by cutting transaction costs and providing access to high-quality advice and information. The investor is also able to exercise greater degree of control over his trading activity and his portfolio. Online brokers have almost eliminated the distinction between full-service brokers and discount brokers by providing, for instance, access to good quality research while keeping commissions at a minimum.
Tags: broker, stock broker, Stock Market, Stock Market Investing