The majority of the buying and selling on the stock exchange is managed by stock brokers on behalf of their customers, who are the investors. Many diverse sorts of brokerage services are available.
"Full-service agents" offer an assortment of approaches to help customers meet their investment objectives. These agents can give advice about which stocks to buy and sell, and frequently have large research sections that analyze market trends and predict stock movements, for their customers.
Such services aren't free, of course. Full-service brokers charge the maximum commission rates in the industry. Your choice whether to use a full-service broker will depend on your level of self-confidence, your understanding of the stock exchange, and the amount of transactions you make regularly.
Investors wishing to save on commission fees generally use discount brokers. Agents in this class charge much lower commissions, but they do not provide advice or analysis. Investors who prefer to create their own trading decisions, and those who trade frequently rely on discount brokers for their trades.
Taking the discount notion 1 step farther, online agents are the cheapest way to trade stocks. Both full-service and discount agents usually offer discounts for orders placed online. Some agents operate exclusively on the internet, and they offer the best rates of all.
Whichever type of agent you choose, your first order of business is to open an account. Minimum balance requirements vary among agents, but it's generally between $500 and $1000. If you're in the market for a broker, read the fine print about all of the fees involved. You will realize that some brokers charge an annual maintenance fee while others charge fees if your account balance falls below a minimum.
Cash Or Margin?
Brokerage accounts come in two basic types. The"cash account" provides no charge; when you purchase, you pay the complete stock price. With a"margin accounts," on the other hand, you can purchase stock on margin, meaning that the broker will take some of the price tag. The quantity of margin varies from broker to broker, however, the margin has to be dealt with by the value of their customer's portfolio.
Whenever a portfolio falls below a predetermined value, the investor will need to add funds or sell some stock. A greater opportunity exists for realizing gains (and losses) with margin accounts, since they allow investors to purchase more inventory with less money. Involving greater risk than money balances, as they do, margin accounts aren't recommended for inexperienced traders.
Selecting The Appropriate Broker For You
You should carefully consider your needs as an investor before making the selection of a broker. Do you wish to obtain information about which stocks to buy? Are you uncomfortable making transactions online? If this is the case, you will be best served with a full-service broker. If you're comfortable buying on the web, and you've got the wisdom and confidence to make your own trading decisions, then you'll be better off with an internet discount broker.
After deciding which type of agent you need, do some comparison-shopping involving competitors. Significant cost differences can appear when you factor in all of the yearly fees and brokerage prices. Estimate how many transactions you expect to make in a year, how much money you can deposit into your account, whether you would like to use margin accounts, and which services you require. Equipped with this information, you will be ready to compare your real costs for a variety of agents, and to make an educated decision.