Factors to consider while choosing a stock broker

If you are looking for a stock broker who will meet all your stock trading and investment needs, here’s how to go about finding one…

There are stock brokers aplenty in the market, but you need to find a broker whose services will match up with your investment needs, styles and goals. If you are an investor investing in securities for the short or long term, your requirements would be different from a day trader who buys and sells shares on intra-day basis. So, depending on your investment style, here is what you should look for in a stock broker.

Trading Platform: The online trading platform of the broker must provide streaming real-time quotes and real-time charting of all the stocks and indices. The platform should offer all the features and tools required for technical analysis of stocks and indices. This will enable the trader to time his entry and exit from the stock. Also, the trading platform should be real fast for speedy execution of trades. Both full-service brokers and discount brokers provide the facility of streaming real-time quotes and real-time charting tools on their trading platforms. A full service broker such as Way2Wealth Brokers also provides technical research reports on various stocks and benchmark indices to help the investor time the entry and exit levels from the stock or index. However, the discount broker may not provide such technical research reports.

An investor buys the stock and remains invested in the stock for days, weeks, months or even years. Therefore, the investor need not monitor the prices of the scrips on a minute-by-minute or day-to-day basis. However, an investor needs to study the fundamentals of the company before taking a decision whether to buy the scrip or avoid it. For this, he needs research reports that will enable him to understand the fundamental strengths or weaknesses of the company. The broker should be able to provide access to fundamental research reports of all the listed companies to such investors. A full-service broker such as Way2Wealth Brokers provides access to fundamental research reports, but the discount brokers usually do not. 

Brokerage structure: The brokerage structure for investors is usually higher than the brokerage structure for the day traders. This is because the trading volume of the investors is quite thin as compared to the volumes generated by the day traders on a daily basis. Compare the brokerage structures of various broking houses and choose the one that offers maximum features and facilities at minimum cost. The full service brokers usually charge brokerage as a percentage of one leg of trade, that is, either on buy value or sale value of the trade. On the other hand, discount brokers charge a flat fee per trade, which usually works out cheaper than percentage-based brokerage. Depending on the volume of trading, the brokerage for a day trader ranges between 0.02% to 0.05%. So, if you are a high volume day trader, you might consider a discount broker for trading. The brokerage for delivery-based transaction is usually higher than the non-delivery based intra-day transaction. Also, the brokerage for delivery-based transaction has to be paid on both legs (buy and sell) of trade. 

Fees and charges: Apart from brokerage on transactions, brokerage firms charge fees such as annual maintenance fees and trading fees to the investor. Usually, full service brokers have highly advanced trading software that provides all the tools, features and facilities for technical analysis of the stocks and indices. The specialised software is available for use at an annual charge. If you are an investor who buys and holds securities for short or long term, check out the annual maintenance fee for the demat account. 

Range of products offered: If you wish to invest in stocks, mutual funds, commodities, fixed income securities (debentures, bonds, etc.), exchange traded funds (ETFs), derivatives (futures and options), IPOs, NFOs, etc. you should consider a full service broker such as Way2Wealth Brokers. A full service broker also offers the facility to buy life insurance, medical insurance or asset (car/home) insurance as well as financial services such as Portfolio Management Service (PMS) and Financial Planning to the investors. Thereby, the full service broker helps investors to create wealth over the long term and achieve their financial goals. The discount brokers offer only stock broking service, hence other products and services are not available on their platforms. 

Margin requirement: Different brokerage houses offer different trading limits on the amount of margin deposited by the trader with the broker. Some brokerage houses may offer trading limit up to 10 times the margin amount, while other brokerage houses may offer trading limit of up to 20 times the margin amount. If you are a high risk taker, you can go for a broker offering higher trading limit. Also, there are brokers that require you to maintain a minimum margin amount in the trading account, while some brokers allow you to withdraw the entire amount in your trading account. So, check out whether the broker has any minimum margin requirement for the trading account. 

Ease of fund transfer: You should go for a broker having tie-up with all major banks to facilitate easy transfer of funds from the banking account to the trading account, and vice versa. Check out the banks with which the broker has a tie-up and then decide. The standalone broking houses facilitate fund transfer within a couple of hours. Some of the banks that have launched their own stock broking services offer instant fund transfer. For the trader, the faster the fund transfer, the better.  

Customer service: Last but not the least, check out the mechanism of the broker to address customer complaints. Read online reviews and comments about the broker by exiting customers. If majority (75% or more) of the reviews are positive, one can assume the customer grievances redressal mechanism is efficient. 

So, depending on whether you are a trader or an investor and your specific trading or investment needs, you should choose a broking firm that is most suitable for you.

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