Friday, December 24, 2010

Choosing a Broker by Ravinder Tulsiani

Choosing a Broker by Ravinder Tulsiani

Depending on the type of investing that you plan to do, you may need
to hire a broker to handle your investments for you. Brokers work for
brokerage houses and have the ability to buy and sell stock on the
stock exchange. You may wonder if you really need a broker. The answer
is yes. If you intend to buy or sell stocks on the stock exchange, you
must have a broker.

Stockbrokers are required to pass two different tests in order to
obtain their license. These tests are very difficult, and most brokers
have a background in business or finance, with a Bachelors or Masters

It is very important to understand the difference between a broker and
a stock market analyst. An analyst literally analyzes the stock
market, and predicts what it will or will not do, or how specific
stocks will perform. A stock broker is only there to follow your
instructions to either buy or sell stock… not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When
you instruct your broker to buy or sell a stock, they earn a set
percentage of the transaction. Many brokers charge a flat ‘per
transaction’ fee.

There are two types of brokers: Full service brokers and discount
brokers. Full service brokers can usually offer more types of
investments, may provide you with investment advice, and is usually
paid in commissions.

Discount brokers typically do not offer any advice and do no research
– they just do as you ask them to do, without all of the bells and

So, the biggest decision you must make when it come to brokers is
whether you want a full service broker or a discount broker.

If you are new to investing, you may need to go with a full service
broker to ensure that you are making wise investments. They can offer
you the skill that you lack at this point. However, if you are already
knowledgeable about the stock market, all you really need is a
discount broker to make your trades for you.

About the Author: Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.Disclaimer: The information and resources found in this blog is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.