Stockbrokers 101: Everything We Need to Know

Once we know everything about stocks, where to get them and how to use an investment strategy to our advantage, we are ready to buy them. Or are we? After all, we cannot buy stocks without a proper stockbroker.

Stock brokers are brokers who will buy or sell certain securities on the stock exchange in our behalf. Back in the day, that would entail us working closely with the stockbroker. However, now times have changed, and we can do everything online by hiring an online brokerage.

stock broker

Another thing that’s changed is that everyone can now afford to hire a broker. Investing used to be reserved only for the wealthy kind. Nevertheless, technology has advanced quite a bit, and we now even have discount brokerages. Thus, anyone can invest in the stock exchange with just a few simple clicks here and there.

Still, the 21st-century stock brokers are not just here to help us buy or sell stocks. They can also help us build our portfolios. However, we will be charged for all of their services — after all, nothing in life is really free.

But we have more than one option when it comes to choosing a stock broker. Let’s see how we can decide on the right one.

Questions to Ask Before Choosing a  Stock Broker

Do we need an investment advisor or can we choose the stocks ourselves?

First things first — there are two major types of brokers out there: discount brokers and traditional full-service stockbrokers.

We will opt for one of these by deciding in which direction we want to go. If choosing and buying stocks is what we want to do on our own, then a discount broker is the right choice. We will just have to pay the commission fees.

Nevertheless, if we don’t have time to learn everything there is to know about stocks or build our portfolio, an investment advisor is highly recommended. Sure, higher fees are a given with investment advisors, and so are minimum investments. However, they will help us develop an investment strategy and build our portfolio with just the right stocks.

When is our broker available?

Every online broker has a designated time frame when we can contact them. However, sometimes, they won’t return our calls immediately, or they might even put us on hold. Thus, it’s crucial to check whether their website works as it should.

We ought to check the website for any technical difficulties during peak trading hours. If the website isn’t working great, then our search for the perfect stockbroker continues.

Do we have to pay a minimum deposit?

Investment advisors require minimum investments, so we cannot avoid them. Furthermore, they most often offer advisory services only to wealthy individuals. Meanwhile, discount brokers may try to attract us with low trading fees, but would still ask us for a minimum deposit.

Nevertheless, there’s one more option as well. If we are a part of a large bank, we can ask them to open a direct investing account. With such an account, we can seamlessly invest without too much hassle.

wall street

How much should our investing budget be?

Depending on the size of our investing budget, we may choose between various options. If it’s big, we can use both an advisor and a discount broker. That way, we’ll diversify the risk and avoid making huge mistakes.

However, if we don’t have a lot of money to invest, then a discount broker is our best bet. But we have two options there. We can either choose a broker that will charge us a fee per each purchased stock or choose one that will charge us per each transaction.

When buying small quantities of shares, paying a flat fee per share is the better choice. If not, then we can always opt for a flat fee per trade commission.

Should we check the reviews?

Yes, checking the reviews is crucial if we want to choose the right stockbroker. Of course, a  perfect broker doesn’t exist, but there are some red flags we should pay attention to. Reviews will help us weigh out all the pros and cons, thus narrowing our options to one broker that should meet all our needs.

Which securities can we purchase with stockbrokers?

Some advisors, as well as discount brokers, can only buy bonds, mutual funds and stocks. Thus, becoming an advanced investor will entail much more than just buying stocks. We ought to use some advanced techniques as well, for example, short selling and trading options. What’s more, we need to ensure that we have some alternatives available before we open an account with a stockbroker.

investing

Does the brokerage offer a research section?

Some online discount brokerages may offer research tools that could help us learn more about stocks and quotes, as well as analyze charts and research reports. That’s the case with most brokerages that are a part of big banks. However, smaller brokerages usually don’t offer such services. Nevertheless, it’s a huge advantage for any brokerage if they offer a research section, as some information regarding certain stocks may not be available online.

Does the brokerage have any other offerings?

Sometimes, a brokerage will try to entice us with some special promotions such as cashback for joining them or limited time free trades. If that’s what we’re looking for, then we can consider these offerings as a huge plus for the brokerage. However, we mustn’t decide on an online broker just because of a special promotion.

Ready to choose your broker?

We will build a long-term relationship with our broker and constantly interact with them. Thus, it’s vital to make a well-informed decision by doing our research, checking the reviews and comparing different brokers.

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