Choosing the right stock broker is as important as choosing the right mate. If you land up with the right stock broker, your time at the stock market will be far more profitable and enjoyable.
Here are a few quick tips to help you find the best one for you:
#1 Decide where you want to invest
It is very important to have clear cut goals that will help you decide your intended areas of investment. Every stock broker will let you invest in the domestic front.
However if you want to have a more diversified portfolio, you may want to invest in overseas market. Now, not all stockbrokers have such facilities and you will have to look for one that does allow such activities.
This would depend totally on your outlook. If you wish to trade, you will obviously trade more often while if you want to invest and hold your ground, your transactions will be lesser in number.
So in order to calculate your costs of transaction, you should choose a stockbroker that will be the cheapest for you. For example if you trade more, don’t go for a flat-rate stockbroker, go for the ones that reduce the rates the more you trade on their platform. But do not overtrade to pick up the benefit of lower rates.
If you want to hold your stocks and trade less regularly go for stockbrokers who give you flat rates but beware of fees that are incurred due to inactivity.
#3 Decide What You Want from your Stockbroker
Stockbrokers are of few types and depending on what you want you can pick one to your liking. The cheapest option will be execution only or discount brokers who follow your trading instructions online or over phone and execute your trades.
Then there are full service brokers that will help you decide where to invest, discuss all your investments and determine how to diversify your portfolio. They will also help you to organize your personal finance so that you can save more.
These brokers are extremely expensive because of the wide variety of services they provide.
#4 Understand How Stock brokers Work
You will be able to pick the best stock broker for yourself if you can understand how these people operate. Some stock brokers offer direct access, meaning they will send your order directly to the exchange.
However most stockbrokers trade through a market maker company that buys and sells stocks constantly. These companies do not trade with the public and they need not be in your country.
For example if you want to buy American stocks, your Indian stockbroker might be using a London-based market maker to buy those stocks.
As a new investor you might not care about how this all works, but if you want to reduce your costs, you have to choose a stockbroker that goes through the least amount of intermediaries, especially more if you are into trading rather than investing.
In the world of stock market trading and investing, you will need to have a stockbroker by your side if you wish to survive and make profits by minimizing losses. But choosing the right stockbroker is tricky.
With so many stockbrokers around, it’s difficult to choose one to suit your needs. The good part: you need only one stockbroker and there are certain points that you should consider before choosing a stockbroker for yourself.
These above tips will direct you to the right stockbroker, the one that will suit your purposes.