How to Choose The Best Stock Broker for Investment



How to choose the Best Stock Broker for Investment-The first step of investment is to open an account with the right Stock Broker. Choosing a right stock broker is not an easy task because not all brokers are right for all investors. 

There are many differences between broker to broker. First and foremost thing is that you should jot down all facilities and services that require for your investment goal and then choose the right stock broker. You must select a broker according to your own criteria and investment goal.

It is very common that investors only negotiate the brokerage rate and leverages to open the account without knowing the Stock Broker or other terms. However, it is very rare to see that the investor wants to know the credential of Broker and inquire about other services. 

We are going to discuss those facilities which investors should consider before choosing a Stock Broker for investment. After all, it's your hard earned money which is going to invest through them. But prior to this, we will understand "what is a Broker and types of Broker" and then we will know how to select them as per own criteria and investment goal.


How to choose stock Broker
How to choose the Right stock Broker


What is a Stock Broker?


We all know the definition of Stock Broker " A Broker is an individual or a company that acts as Intermediary between buyers and sellers and earns a commission." In Stock Market Brokers need to register with SEBI, Exchanges and Depositories Services irrespective of its status.

Some people get confused the term Stock Broker and Sub-Broker, an investor should be clear before opening the account whether they are opening their account directly with the Broker or through a Sub-Broker/Authorised Person(AP). 

Though both are registered with the Exchanges, out of the two a Stock Broker is always a better choice. Brokers are known as members of the Exchanges like NSE and BSE. Whereas the Sub-Broker/AP's are only Exchange registered facilitator they introduce investors to the Broker. 

It is a very common practice that an investor sometimes becomes a victim of false commitment by Sub-broker or Authorized Person. One should be very careful before opening an account whether they are getting associated directly with a broker or through sub-broker, if through AP then should not authorize them for trading on their behalf.




Types of Stock Broker

Primarily there are two types of Stock Broker-
  1. Full-Service Stock Broker
  2. Discount Broker
Full-Service Stock Broker offers a full bouquet of Investment Services for his clients like Research reports, Call and Trade, Advisory, Dealers etc. Full-service brokers are also two types

  1. The 3-in-1 account, which Bank subsidiaries are offering like ICICI direct, HDFC Security etc
  2. Full-Service Broker other than Bank subsidiaries like Sharekhan, Motilal Oswal, IIFL etc

The only difference in above two is, a 3-in1 account is having bank account interlinked whereas another one is using payment gateway of various banks. It is not required to transfer fund in the bank subsidiaries whereas for a full-service broker you have to transfer fund first and after getting credit into the account you can trade.

Discount Broker is a new concept which has got a tremendous response in last decade like Zeroda, RKSV, Smart Trade Online etc. The main advantage of a discount broker is low cost. Its main objective is providing a trading platform, no other facilities.

Both Full Service Broker and Discount Broker have got their own client segment and are almost at par in the industry. Like full-service Broker, Discount Brokers are also regulated by the SEBI and are safe for doing investment through them.

Now as we know about Stock Broker and types of stock brokers, we will now understand how to choose the right Broker as per investment goal. Basically, you have to be very honest with yourself to know where you are standing in the investment education graph. 

If you are beginner not having much knowledge about the investment market, need knowledge about financial products then you should choose for full-Service Broker or may be a Bank Subsidiaries. Tough, it is a bit costly but the full-service Broker will handhold you and guide you in every step.

You should understand that there is no sure shot formula or guaranteed return of Investment whether you select a Discount broker or Full-Service Stock Broker. The selection of a Broker is important because it will fulfill your investment goal smoothly. 

Say for e.g if you are a new investor and wanted to invest on monthly basis and opened your account with Discount Broker. There you won't find any guidance on how to invest and where to, after six months you would be frustrated and closed the account.


So you need to first note down what all services or facility you want from a Broker and then choose the Broker accordingly. Here we have prepared a list of facilities and services which Brokers are offering, you can consider these as selection criteria to choose the right Broker for your Investment.

Various Investment Services and Facilities of Stock Broker:




Low Brokerage Charges- Many investors and traders give 100 percent weightage in these criteria for selecting a broker. Discount Brokers are charging very low Brokerage compare to a full-service broker. There are also few full-service brokers charging lower brokerage and zero Demat AMC.

Trading platform- Almost all Brokers are providing Online Trading Platform, you need to check delay on live streaming rates, and charts available on the trading platform.

Reports- Whether all reports are available on the website or not.

Mobile App- Whether the Broker have Mobile App so that if you are out of town you can trade or cut the position easily.

Shares are transferred to Demat A/c- There are few Brokers they don't credit shares into clients Demat A/c on a delivery based purchase unless client request for. They keep those shares in the company pool account. You need to check this point before opening an account because anyone can misuse your share.

Banking- You need to check out the Pay-In and Pay Out timings with the Broker.

Mutual Fund and IPO- Whether the Broker is having Online Investment facility of Mutual Fund and IPO.

Brokers Credential- It is better to open an account with an experienced and established Broker who are in this market at least for 5 years. You need to check the reputation of the company also where you are going to associated to fulfill your investment goal.

Advisory Services- Performance record of their advisory calls, you can take 3 days trial period before opening your account with the Broker.

In-house Research- Whether in-house Research Desk is there or not for fundamental calls and its performance since last 1 year. This is required if you are a delivery based trader or long-term investor.

Conclusion:



There are many other services providing by Stock Brokers likeAutomated Trading, Call2Trade, sitting at their office, low-interest rate in debit balance, a margin on mutual funds and bonds, etc. You need to first write down the services you need for your investment in a piece of paper and then search a Stock Broker who fits into your criteria. Please remember that you may not get 100 percent of all facilities and services from a single broker but can choose the closest one.






Happy Investing!!!

Finogyan Team







How to Choose The Best Stock Broker for Investment How to Choose The Best Stock Broker for Investment Reviewed by Finogyan on December 07, 2018 Rating: 5

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