Picking the Right Stockbroker

Finding a stock broker is one of the most important things you have to do if you’re planning to invest in the stock market. You need a stockbroker to assist you in executing your orders, thus they serve as a link between you and the stock exchange. Stockbrokers these days compete to offer investors the most value for their portfolios — it’s up to investors to pick the best brokers when trading. In choosing the right broker, you need to know where you fall in the range of services offered.

Gone are the days when investors had no choice about the type of stockbroker to use. Full service brokers had in the past enjoyed full control of the market and their high commissions were the standard. Changing market demands later gave rise to discount brokers, who charge considerably less than full service brokers, thereby benefiting investors. The Internet has also provided individual investors access to tools that only brokers had in the past.

Full-service vs. Discount vs. Deep Discount

Full Service Brokers. If you’re planning to invest in the stock market but can’t come up with your own investment decisions, then you will need a full service broker. Investors are provided with a complete range of financial advisory services, including recommendations of specific stocks and investing plans that investors can review periodically and make adjustments. A full service broker is the best option if you’re not quite sure with your investments. The service comes with a price but the benefits provided simply outweigh the extra cost.

Discount Brokers. Discount brokers are deviating from their traditional order taker role.  It may not provide a comprehensive planning afforded by a full service broker, but discount brokers offer investment advice for investors’ considerations. They offer access to research resources from their Web sites.

Deep Discount Brokers.  Deep discount brokers cost less than discount brokers. These brokers, traditionally order takers, have adapted to changing market demands to provide better online platforms and customer service.

In searching for the right broker, keep in mind that it’s not just about the price. You have to be honest with yourself about how much help you need to make well-informed financial choices and make sure that you are comfortable with your pick.  Also, be cautious when deciding which broker to use. There’s peace of mind if you know that your broker is covered by the Securities Investor Protection Corp. (SIPC).  Should the firm fail, SIPC will protect your assets in a brokerage account up to $500,000.  Trading losses, however, are not covered by the insurance.

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