Types of Stock Brokers you need to know
If you have decided to enter the stock market threshold, you would meet a reliable intermediary named the Stock Broker.
Every transaction in the stock market involves a reliable bridge of communication between the market participant and the stock market.
Licensed Stockbrokers registered by Securities Exchange Board of India (SEBI) act as such reliable bridging agents to carry out buying or selling transactions in India.
There are two types of stock brokers you would need to know:
Knowing the difference is imperative since no transaction in the stock market is devoid of the stock broker intervention, hence it is important to choose the right stockbroker based on your requirements and convenience to best invest in stocks.
Full-Service Brokers :
The stockbrokers who provide facilities and services such as :
3 in one account ( Banking + Demat + Trading )
Client Relationship Management
in stocks, mutual funds, commodities, currencies, insurance, and tax saving instruments are Full-Service Brokers.
Discount Brokers :
The stockbrokers who provide only the trading platform for buying and selling transactions are Discount Brokers.
The significant characteristics of availing Discount Brokers are :
Lower Commission Charges compared to Full Service Brokers.
Access to Online Terminal of information and trading platform.
Flat Brokerage Charges on trade for any investor (be it a big player or a small investor) or bigger / smaller orders
Objective (Unbiased) servicing to customers with no third-party product endorsed.
Here are the salient and key points that distinguish Full-Service Brokers from Discount Brokers :
Which broker to choose?
Choose a Full Service Broker if :
You are a beginner in the stock market ,
You have enough financial capacity to invest in brokerage,
You cannot spend time in research on your own in identifying the right investment avenues and opportunities.
Choose a Discount Broker if :
You can research and analyze for investing,
You cannot incur higher costs on advisory to trade and invest in stock market,
You have time and knowledge to best use resources for investing and trading decisions.
Choice of broker depends on the market participant’s
Time, knowledge, and awareness of stock market anatomy.
A beginner, a novice can avail Full-Service Brokerage if incurring higher commission for advisory isn’t a problem.
A well-informed, aware investor with ample time and knowledge to best use resources can seek a Discount Broker with individual efforts of researching and decision making.
Subscribe to The Fin Lit Project and join our community of finance enthusiasts to make better and informed financial decisions by Embracing Financial Literacy!