Generally speaking, brokerage charges are the fees that a broker charges for holding and managing the investments. These charges include inactivity fees when you are not a regular trader, fees for analysing investment data, and annual charges. It is important for you to remain aware of various kinds of brokerage fees and types of brokers present. In this article we would provide basic facts about different types of brokerage firms.
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Types of brokerage firms available
You will find two main types of brokerage firms:
1) Discount broker and
2) Full service broker
There are significant differences between these two and the charges they have.
1) Full-service brokers
Full-service brokers get commissions depending on the transactions. At any full-service broker, the average brokerage charges for each transaction are much higher than that of a discount broker.
Full-service brokers make you pay a premium for advice, education, and research. However, keep in mind that a full-service broker is also a salesperson. You will even find professionals who will charge you one percent of the total assets of a client. It is better to go for full-service brokers when you do not have the time to sit and research about different options.
2) Discount brokers
A discount broker usually doesnโt provide investment suggestions. The fees for a trading account under discount brokers is a lot reasonable compared to full-service brokers.
The fees changes from one broker to another because they keep reducing their fees as per market conditions to get a greater market share and draw more customers. In fact, many of them provide free trades. Discount brokers are able to save a significant amount of money in transactions if you do enough research.
Researching about the stock brokers
Most of the investors do not even read the guidelines offered by the Securities and Exchange Board of India (SEBI), even though these guidelines are easily accessible to the public. Under the SEBI Act of 1992, this body is the principal regulator for Stock Exchanges in India, whose prime function is to protect investor interests and regulate the securities market. Thus, being aware of its rules and regulations is necessary and not optional.
Furthermore, you need to focus on industry trends. For instance, in case fast food chains offer organic and natural food, you need to go with the flow rather than against it. Find out the finest of the lot by carrying out a thorough research. In fact, there is no reason for you to even dive deep. The rule of the thumb is that when the broader market remains hot, the main factor deciding stock price appreciation is revenue growth.
Traders and investors look for revenue growth in the bull markets. When the broader market remains cold, the main areas of success are strong balance sheets and net income growths. Traders and investors prefer running to safety for the dividends and sharing buybacks in such scenarios.
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The parting notes
When you are impulsive or unwilling to do the homework, you need to go for full-service brokers. Otherwise, you can opt for discount brokers who let you execute trades but don’t provide investment advice.
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Thank you Suresh ji for the valuable information specially to the new comers..
Any good suggestion amongst the 2?
Thank you Suresh ji for your nice article on types of brokers.
Now I got clarity.
I would like to request you to write on such type of subjects more frequently, enable your subscribers like me to invest in Share market more confidently & correctly.
Wish you and your family a VERY HAPPY DIWALI & PROSPEROUS NEW YEAR.
Sanjeev
Thank you for the Diwali Wishes. Wish you and your family a happy and safe Diwali.