Choosing a Broker

Depending on the investment you plan to make, you may need to hire a broker to handle your investments. Brokers work for brokerage houses and have the ability to buy and sell stock on the stock exchange. You may wonder if you need a broker. The answer is yes. If you intend to buy or sell stocks on the stock exchange, you must have a broker.

Stockbrokers are required to pass two different tests to obtain their license. These tests are strict, and most brokers have a background in business or finance, with a Bachelors’s or Masters’s Degree.

It is essential to understand the difference between a broker and a stock market analyst. An analyst analyzes the stock market and predicts what it will or will not do or how specific stocks will perform. A stockbroker is only there to follow your instructions to buy or sell stock… not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When you instruct your broker to buy or sell a stock, they make 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, may provide you with investment advice, and are typically paid in commissions.

Discount brokers typically do not offer any advice and do no research – they do as you ask them to, without all of the bells and whistles.

So, the most significant decision you must make regarding brokers is whether you want a full-service broker or a discount broker.

If you are new to investing, you may need to go with a full-service broker to make wise investments. This is because they can offer you the skill that you lack at this point. However, if you are already knowledgeable about the stock market, you need a discount broker to make your trades for you.