How to Find the Right Stock Broker For Your Needs
The two main types of brokers are full service brokers and discount brokers.
- Full service brokerages, as the name implies, offer premium services from the stock brokers who give you advice on what stocks or mutual funds to buy, explain the analysis behind their recommendation and answer any other questions you might have about the markets or investing. Examples are brokerage houses like Smith Barney, Morgan Stanley or Merrill Lynch. Since the fees for these services are quite high, most young investors prefer to deal with discount brokers instead of full service brokers. On the other hand, professionals that have developed relationships and trust with their brokers over the years don’t mind paying the higher fees to receive the premium service.
- With a discount broker, you won’t receive the advice or guidance, but you will receive much cheaper rates when purchasing stocks, mutual funds or bonds. This makes sense for investors who do not want the premium rates but still want to invest in the markets. With much lower fees, it makes it affordable for individual investors to participate in the stock markets without paying large fees for a stock broker to simply punch in the numbers. Don’t let the name fool you, however, discount brokerages provide you high quality information, tools and services. The level of service that you utilize is up to you, as it is more of a pay for what you use model. The most common type of discount brokers are E*Trade, TD Ameritrade, and Charles Schwab.
Whether you choose a discount or premium broker, be sure to fully understand their fee structure and the services they offer, this includes reading the small text with a magnifying glass.
By InvestorGuide Staff
Posted in ...Investing