There are only certain avenues available to investors to purchase shares in a company and all of them revolve around a broker.
So what are brokers and how are they useful? Brokers are people whom have access to the market and handle your orders to buy and sell shares. They are a type of financial intermediary – that is, they help companies sell their shares and investors buy them effectively bringing both parties together and closing the gap. They charge a fee for their service – called a commission – and have a duty to you, as their client to get you the best deal they can.
Full Service vs Discount Broker
There are number of differing types of brokers and it is important that you understand the distinction between them. What sets brokers apart is whether they offer advice or not. A Full Service Broker will charge you a premium for their service, but in doing so will give you recommendations on buying and selling shares and give you insight into the reasoning behind their decision-making.
A Discount Broker will not charge you anywhere near that of a Full Service Broker and can do so because they offer you no advice in what stocks to buy and sell. If you have already made a decision about what company you to want purchase equity in, a Discount Broker will be the person you want get into contact with to transact your trade. Discount Brokers can be contacted either over the phone – usually at a high cost – or over the internet and are sometimes also called Execution Only Brokers because all they do is complete your request to buy or sell.
In deciding which is the best broker for you, ask yourself whether you need advice or not. Don’t expect to ring up a Discount Broker and ask for advice on what shares to buy because you won’t get an answer. Conversely, you must be prepared to pay top dollars to get advice from a Full-Service Broker and this cost may defeat the purpose of you investing in the first place! In our opinion, we hope that you will begin to take an interest in the stock market and have a go yourself as “you have to be in it, to win it” – meaning that a Execution Only Internet Broker is the way to go if you already know what you want to purchase.
Remember that you should always do what’s best for your individual needs and wants – it’s better to get advice about what to do with your money if you are unsure about investing or don’t want to take any risks. Check with your financial planner or consult as many different investment professionals that you can before making any decisions about which option is the best one for you
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