How To Find The Right Stock Broker For Your Needs

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Picking a broker is going to be a main decision when you decide to invest, as they are going to be taking a chunk of your hard-earned money every time you place a trade.  So knowing the different services that these companies provide is just as important as placing the investments with them.

The two main types of brokers are full service brokers and discount brokers.

• Full-service brokerages, as the name implies, offer premium services from the stockbrokers who give you advice on what stocks or mutual funds to buy, explain the analysis behind their recommendation and answer any other questions you might have about the markets or investing.  Examples are brokerage houses like Smith Barney, Morgan Stanley, or Merrill Lynch.  Since the fees for these services are quite high, most young investors prefer to deal with discount brokers instead of full-service brokers.  On the other hand, professionals that have developed relationships and trust with their brokers over the years don’t mind paying the higher fees to receive the premium service.
• With a discount broker, you won’t receive the advice or guidance, but you will receive much cheaper rates when purchasing stocks, mutual funds, or bonds.  This makes sense for investors who do not want the premium rates but still want to invest in the markets.  With much lower fees, it makes it affordable for individual investors to participate in the stock markets without paying large fees for a stockbroker to simply punch in the numbers.  Don’t let the name fool you, however, discount brokerages provide you with high-quality information, tools, and services.  The level of service that you utilize is up to you, as it is more of a pay-for-what-you-use model.  The most common type of discount brokers are E*Trade, TD Ameritrade, and Charles Schwab.

Besides the level of service that both types of brokerages offer, the type of investing style that you as an investor follow will also affect which way you should lean towards.  For instance, if you hold short-term positions and make plenty of trades throughout the month, then it would only make sense to utilize the services of a discount brokerage in order to minimize your fees.  On the other hand, if you are an investor that pours through years of financial statements, assesses the company’s strength, and looks forward in years, not months, then a premium brokerage could provide the extra information you need to qualify the decisions you make.  They would give you the extra layer of professional information and knowledge that allows you to be convinced of your own work and comfortable to conduct your investment.

Whether you choose a discount or premium broker, be sure to fully understand their fee structure and the services they offer, this includes reading the small text with a magnifying glass.

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