How to choose share brokers

A stock broker makes his living on the commission generated from share dealing, executing commodity futures contracts and futures and options contracts for his clients. An ideal share broker is one who charges a fair commission, equips his clients with necessary tools and information, and should maintain a personal rapport. Here is how you must choose a share broker:

Choosing a broker: Factors to consider

1. Type of share brokerage Full service Full-service share brokers provide a range of financial services. They help trade in shares, bonds, insurance, derivatives and other products. They also conduct research into the financials of companies and sectors and pass on research reports to their clients for a fee. They also make buy/sell recommendations. These brokers charge a high commission on trades. Discount brokerages These are plain vanilla online brokers that facilitate dealing in shares online. They don't offer advice, nor deal in a variety of financial instruments. However, they make up for that by charging low fees. They typically charge a flat fee per trade irrespective of the volume and value of stock trading. So, the first thing to be decided is which type of brokerage to go for. That decision depends on the trader/investor. If traders/investors don’t need any information over and above doled out by TV channels and websites, then they can choose a discount brokerage house. 2. Other factors to consider Some people feel safer transacting business with a brokerage that has a physical address and branches. They just don’t trust brokers that are online only. Is the trader comfortable with online trading account or does he prefer to pass orders over phone? Does the brokerage have share brokers on call? Does the trader trade in international markets and needs a terminal that’s connected to the international markets 24/7? Or, does he trade only in local markets? Does the firm provide what the trader wants? Can the trader view his account information online? Or, does he have to pay for paper statements that are mailed to him? Does the trader want to view real-time technical and financial data while trading? Does the brokerage provide such data? How much extra do they charge for providing it?

To sum up

Investors who do not trade frequently must go with a full-service company. Even though the commission charged is high, the quality of information provided can easily recover the high cost. Moreover, full-service brokerage firms can engage in research and can discover a multibagger for their clients. People who trade frequently, know about trading online, are experienced in stock market and who do not want to rely on their share broker for information, can go with a discount brokerage.