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What is Stockbroker and Which One To Choose?

Posted on 2019-05-07 in WEALTH NOTE RESEARCH


Choosing a stockbroker is the first step to start your stock market journey. Without a stockbroker, there is no way you can invest/trade in the stock market. For a hassle-free and seamless experience, it is imperative to choose a reputed stockbroker known for its disciplined services. However, choosing one can be overwhelming given the utter number of stockbrokers available in India. Before you take a plunge into stock investing, let's get a brief idea about the stock market.

Overview On Stock Exchange

A stock market or exchange is a secondary market where buyers and sellers meet to buy and sell shares of companies listed with the stock exchange. It is a platform for stock brokers to trade in company stocks and government securities. Two of the premier stock exchanges in India are the Bombay Stock Exchange (BSE), and the National Stock Exchange (NSE) that primarily deal in share trading. For commodities trading, we have MCX and NCDEX. All these stock exchanges are governed by the Securities and Exchange Board of India (SEBI). Once the stocks are sold in the primary market, they are traded in the secondary market where investors buy shares from other investors. 

What is a Stockbroker Since the stock exchange alone cannot provide services to millions of investors at the same time, stock brokers facilitate trading for clients. These stockbrokers function as an agent or intermediator between clients and the stock market. Their job is to help buyers and sellers to buy and sell shares for which they earn some commission. 

These stockbrokers have to register themselves with the SEBI and become a member of the stock exchange to start trading on behalf of their clients. Whether they are functioning in an individual capacity or as an organization, they have to display their registration number of their websites and all the official documents. There are majorly two kinds of stockbrokers: Full Service Brokers and Discount Brokers.

Full Service Brokers

They are the traditional brokers that provide an assortment of personalised relationship manager services. They give both online and offline service for buying and selling of financial products. They charge turnover based brokerage, which is why choosing them needs to be done carefully. These stockbrokers have their own investment research department and provide recommendations to their clients on what to buy and sell. Besides recommendation and advice, they also provide extra loans to buy shares. 

Discount Brokers

These brokers charge a flat brokerage fee and provide a limited range of financial services. They don't offer any advice on investment and just follow the orders of their clients. Basically, they provide a trading platform to investors and give online services only. Since they operate online, they are able to keep a low overhead. Unlike the full service brokers, the discount brokers don't provide any extra loan to buy shares or offer any personalised relationship manager service. 

Which stockbroker to choose

Brokerage charges: To earn, it is essential to save. Hence, a stockbroker whose charges are lower would be great in this regard. However, lower charges don't guarantee that your money will grow. Along with the charges, you need to focus on other aspects as well. If the lower charges are offered in lieu of week customer service, you're going to regret your decision. Therefore, don't get lured by their low brokerage fee structure and instead check their offerings. Also, evaluate their track record. 

Transparency: It's very difficult to find someone who follows a good business practice these days. This doesn't mean you should stop looking for one. There are stockbrokers who are transparent in their dealings and give high regard for their clients' investments. Just be sure to check their pricing policies since there could be hidden charges involved. Any stockbroker who values transparency will have their fee structure published on their website. 

Management Team: The stock market is quite an intricate place where keeping eyes on everything is impossible for a single person. A good team and strong passion for the stock market are vital to serving customers. How the investors will do in the stock market will largely depend on the management team. Only with a good teamwork, the stockbroker would be able to help clients grow their money. 

Customer Service: A stockbroker must provide efficient customer service to their clients. They must be able to resolve any issues with lower turnaround times. Serving customers through every possible medium such as the phone, email, social media, chat, SMS is important to consider when choosing a stockbroker. If the stockbroker provides customer service in your chosen language and for maximum hours of the day, go ahead. 

Trading Platforms: A stockbroker needs to be tech-savvy to provide an efficient trading platform to clients. One of the crucial criteria in choosing a stockbroker, especially when India is moving towards digitization, is the ability to provide an online trading platform. NSE and BSE based trading platforms are common with some of the stockbroker. But a few stockbrokers have also made their trading platforms unique by providing additional and usable features. However, such stockbrokers charge based on the trading platform offered and not based on trades. 

Whether you are a beginner or a seasoned investor who've already tried hands in stock investing, you can grow your knowledge about the stock market by taking share market classes in Pune. So enroll yourself today with https://wealthnote.in to start your stock market journey.


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