As investors are aware that there are many brokers & brokerage companies out there that are eager for your business but what should investors look for in a company? But how to choose the right Stock Broker & how to choose stock brokerage firm?
In this article I hope to outline the main factors when looking to use a Brokerage for investing your money. Above all you should always remember that you are looking to make money so your Brokerage must help to you facilitate that, they must be on your side for you to make money and not just simply earn commission.
How to Choose Stock Brokerage Firm
1) Regulation: This is the most important factor to look for above all. Only chose a Regulated Brokerage that is allowed to trade all of the products that you are interested in – Stocks, Derivatives, Commodities etc. Do not work with Unregulated Brokerages as they will not hold any insurance for you should they go out of business and also their staff will not be qualified and of a high standard.
2) Size of brokerage firms: This is of high importance as if the Brokerage is large then it will offer many services and offers. It is a general rule that, the larger the Brokerage firm, the more it can offer. There might be very good smaller Brokerages also but make sure that their offer fits your needs as an Investor.
3) Volume: This is a true indicator of trust by other clients in the Brokerage’s practices. The higher the volume means that they have a large client base. Therefore obviously other clients trust them and are happy to invest their money. Also the higher volumes means that the good Brokers can give information on what other clients are doing, not exact orders of course, but if they are buyers or sellers in general or of a certain stock. You can find out the volumes traded by looking at the Brokerage rankings on the Stock Exchanges or reading through their advertising, this should hardly take a couple of minutes to find.
5) Services offered by stock brokerage firms: There are so many services that a Brokerage should offer apart from simply executing the trades – they need to offer Research so that their Brokers have a true insight into the market and stocks. These may include a good Online Trading Platform, an over the phone trading service so that you can call them with orders, should have the electronic platform break, a Help Desk in times of an issue, regular account status updates with all charges and trades listed and of course a friendly attitude of course.
Look for a Brokerage that offers you market news, updates, trading ideas – what you need is something that results in you having advantage over the market and to make money.
6) Trading costs: It is not always the best policy to go for the cheapest Brokerage as they don’t offer the services mentioned above, the cheapest may not offer Research for example which is key in determining where the markets and stocks are heading and research gives their Brokers vital information. It is important to weigh up the price to offering level to make a choice on which firm is the best. If you are a competent trader that doesn’t need much help then a basic service is fine, if you want to talk to analysts and need more help in trading then this cost is definitely useful. The best Analysts always need to be paid well which impacts the price.
7) Location: As India is such a large country, location does matter as the Brokerages that are close to Financial or Business Centers will get information quicker than the Cities that are far away. Brokers may meet or know people working in the Companies that are Traded on the exchanges and they may talk about how business is going or if there are problems. These are very useful information. Also the actual Brokers that work in the Financial Centers are usually of a higher standard than those in the provinces, competition is tougher and they are paid more. If you can go for the better levels of Brokerage then this should mean that you get a better level of service and also advice.
As there are many brokerages out there then there are plenty of choices to choose from Brokerage wise but always remember that this is an investment option for you but not for them – they are salesmen at the end of the day and very few are Investors.
Treat choosing a Brokerage for you like you are going to choose a new car for buying and get a check list for that like – Sedan or SUV? What is the power? What colour? How fast? In the same way draw up a list of important features that you may need and then your decision would be easier.
Hope this article have answered you queries regarding how to choose Stock Brokerage firm & also how to choose the right Stock Broker.