Stock Broker: What you should know before choosing one.
Stock brokers are the middlemen between the customers and the stock exchange. When individuals or corporations want to buy stock or sell stock they must go through a brokerage house because only members of the stock exchange can perform transactions. Stock brokers determine the best investments for their clients after gathering information from them about their financial abilities and their needs. He or she does this also to understand the level of investment risk the client is comfortable with. The broker then sends the order out to the floor of the securities exchange via computer or phone. Once the transaction is completed, the broker supplies the client with the price. Stock brokers earn their income through charging commissions on every transaction that goes through them. Their commission is known as the term "brokerage" and it is charged against the service that a broker provides to its customers.
In order to become a stock broker, a college degree is not necessarily required, however almost all brokers have one as this job absolutely requires a stock market investing education. Stock brokers must also be licensed and most take this test after they have been employed by a brokerage firm for four months where they have had on-the-job training. In order for a broker to obtain a license, he or she must take the General Securities Registered Representative Examination and must also, in many cases, post a bond.
When deciding upon what type of stock broker you would like to use when investing in the stock market, you must first decide if you would like a full-service or a discount broker. Full-Service brokers offer a variety of financial products, as well as investment advice, investment strategies, and research. They charge higher fees and they may offer stocks, bonds, annuities, derivatives, and insurance. A full-service stock broker is compensated by how often you trade, and not according to how well your stock portfolio performs.
Discount stock brokers do not offer any advice or research and they charge lower fees than full-service brokers. They transact trades with no added extras and they manage fewer products. They sometimes offer online computer order entry services and are usually paid a fixed salary to execute trades in the stock market. Discount stock brokers do not solicit, and they are not paid commissions. Those that have the lowest prices and the best service, get the most trades. They make their money by doing business in quantity and typically compete on price and on the dependability of their services.
Regardless of the type of stock broker you decide to use, the very first thing that you should find out is if that broker is registered under the Securities and Exchange Board of India (SEBI). As long as the broker is registered under SEBI, then he or she remains accountable to you at all times when playing the stock market with your money. You also need to investigate the history of a stock broker. The best way to do this is simply asking around. Consult your friends, fellow investors, and relatives. . Also, always ask your stock broker to provide you with a few names of their current clients who have a similar background and investment plans as you have.
Be sure that you keep in mind your investment goals and the types of services that you are looking for when choosing a stock broker. Know the stock brokerís investment philosophy and how that brokerage firm chooses to work with its clients. Be sure to find a stock broker whose services match your needs and do this by knowing the details of what services they provide in order to make money investing in stock.