- While choosing a stock broker, frequency of transactions can be kept in mind to gauge the impact of brokerage.
- Stability and reliability of the broker’s platform are of the utmost importance.
- Due diligence should be done on the range of markets and instruments offered by the broker.
An investor or a trader has to have a good brokerage service for transacting in a recognized stock exchange. However, many stockbrokers nowadays provide almost all of the necessary services but differ in pricing, technology, additional services, etc.
Also, every investor has a different investing style based on his frequency of investing, size of the capital, number of markets to invest etc. Therefore, it becomes imperative for an investor to select a stockbroker that suits his investing style.
Just as there are some general guidelines to help an investor make informed investment decisions, there are also a few key aspects that can be looked upon to select the right stock broker. Here’s the list of 5 such tips.
1. Broker Type
There are primarily two types of brokers, namely, discount brokers and full-service brokers. The key between the two is pricing as discount brokers are relatively inexpensive but at the cost of omitting additional services that a full-service broker provides. For example, generally, discount brokers do not provide a dedicated relationship manager to the client, but it's quite a norm for a full-service broker.
For most of the investors, the commission is the most crucial factor to select a stock broker. It is no brainer that lower the cost of investment, higher would be the net profit and vice versa. To make the selection simple, those who are a long-term investor might not get impacted much by the cost compared to someone who makes multiple trades in a short span of time such as an intraday trader. Therefore, the frequency of transactions plays a crucial role in selecting a right broker.
3. Customer support
Sometimes customer support becomes vital when an investor’s money is at stake. Having a good support team helps ensure that the investor may get in touch with the experts in a few minutes regarding his query. Lack of customer support, like in the case of account freeze, may lead to substantial losses.
4. Stability of the platform
One of the worst nightmares for an investor is the broker going down during an urgent transaction. For most sophisticated investors, the broker's terminal's reliability and stability are of the utmost importance. Therefore, it’s always recommended going with a well-established and technologically advanced broker.
5. Range of markets/instruments offered
There are many markets and instruments to invest/trade in, and all brokers might not provide all of these investment opportunities. For e.g. a broker might be providing quite a good range of markets to invest in but might not be affiliated with an exchange where an investor needs to buy his securities. Therefore, doing due diligence on the broker's affiliations with exchanges and markets or instruments offerings is a must.