Candlestick Trading Blog
February 1, 2008
Investment Broker
Do You Know What Type of Investment Broker You Need? An investment broker is an individual who brings together buyers and sellers of stock and acts on behalf of them. He or she must have a license to operate and must also charge a commission on trades executed per the instruction of buyers and sellers. If you are looking for a broker, it is important to note that there are a few types to choose from depending on your investment needs. In this article we will discuss the discount broker, the deep discount broker, a prime brokerage firm, and online brokers. Online brokers pretty much encompass the other broker types, however, due to the increasing popularity of internet trading. Another name for an investment broker is also the most commonly used term stock broker. Stock brokers must pass two licensing exams in order to advise clients, execute transactions on their behalf, and to solicit business from potential investors. Online trading has taken off over recent years due to the rise in technically inclined investors and the popularity of the internet. Investors are able to access account information immediately and are allowed to trade stock 24 hours a day. For those investors who would like a little human interaction with an investment broker, they can opt to utilize the services of a broker however it will come with a higher fee. There is also the option of utilizing a deep discount broker. Deep discount brokers allow the investor to place trades over the phone without having to talk to a real live person when selling or buying stock. Discount brokers offer some of the same services as a full service broker. They execute trades on the investor’s behalf when told to buy, sell, short, etc. The main difference is that they do not offer investment advice like the full-services investment broker. The discount broker is for those successful traders who require less hand-holding and therefore don’t want to pay for full services. When discussing the investment broker, it is also important to note the prime brokerage firm that offers bundled packages of services offered by investment banks to hedge funds. Hedge fund investing through a prime broker provides a centralized securities clearing facility for the fund. The hedge fund’s collateral requirements are netted across the deals handled by the prime broker. The main services bundled by the investment broker and provided by the investment bank typically include the same services regardless of the actual investment bank. The package usually contains operation support provided by the prime broker in which he or she will engage with the other broker dealers. Also included in the package is securities lending and global custody. It includes financing to facilitate leverage of the investor’s assets and also includes customized technology for purposes of reporting the client’s (hopefully) strong portfolio. When shopping around for an investment broker you must ask many questions about its customer service department. Ask for customer references, research the firm on the internet, and if you are trading stock online, ask about their back-up policies if their site is down. If you are comfortable with a computer, and don’t need the comfort of a real-life person, look into trading stocks via an online discount broker. Ask your fellow investors for referrals if possible, but still conduct your own research to ensure that the investment broker that you decide to go with fits your trading style and personality. Now that you know a little bit more about the investment broker and the different levels of services provided, you can continue to research brokerage firms until you find the one you are comfortable with. Good luck and happy hunting! Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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