How to choose the right stock broker?
Are you looking to invest in Indian stock market, which is growing tremendously? If yes, the first and foremost thing you should do is to find a good stock broker through which you can make a foray in stock market.
In recent times, the Indian stock market has grown amazingly and provided amazing returns to the investors. Be it to invest in mutual funds or shares, a good stock broker on your side means sound investment decisions, which further lead to impressive returns on your investment. This is what the foremost objective of investing in stock markets.
Selecting your stock broker is the one the biggest step that you take while entering the world of investing. You cannot start investing/trading until you have a broker (unless you are using someone else’s account).
Another most important thing you need to invest in stock market is high levels of knowledge about stock market and its elements. There are various resources that are available both online and offline that provide detailed insights into stock broking.
Do remember that stock brokers charge a fee for giving their services, so you need to be careful about this aspect. Choose a broker whose fee you can easily pay.
The large number of stockbrokers available in India can confuse fresh investors and traders. It is imperative for them to choose the right brokerage if they want a unified, hassle-free experience. There are different kinds of brokerage companies in the country and they can primarily be categorized into two distinct categories: traditional brokerages and discount brokerages.
Both of them work in different ways. Traditional brokerages were set up much earlier and concentrated on providing regular trading tips to their clientele. This business model is typically based on the fact that most people need trading thoughts which these brokerages provide.
In general, traditional brokerages charge a percentage of the brokerage cost. This differs from client to client and relies on volumes and negotiations with the broker. It varies between 0.3 percent and 0.5 percent of the transaction value.
On the other side, discount brokerages refer to platforms that provide consistent execution services but don’t provide trading ideas like contrary to their traditional counterparts. Discount brokerages cater to the rapidly growing active trading/investing community in India which prefers to self-learn and take independent decisions. Furthermore, they charge a flat fee of Rs 20 per transaction irrespective of trade volumes which is a big plus for traders and investors.
However, it is advisable to consider the following factors before choosing a particular brokerage house.
- Technical expertise: Any stockbroker which carries an extensive expertise in technology will be able to lend an edge to their customers. A broker who has an in-house technology team is found to be a good choice to meet the evolving needs of traders and investors in the form of new platform features and solutions for the long-run. As stockbroking-related technology is very important and complex, one should pick a brokerage which has an excellent track record in providing a steady and trustworthy platform, apart from the bells and whistles.
- Transparency: There are a number of options in which a broker can charge clients. Hence, to ensure that their pricing policies are translucent and published on their website in detail. This will help avoid unfriendly amazement’s in the future since many brokers have been known to charge hidden charges without prior revelations. Moreover, make sure that they have detailed guidelines listed in other aspects of the business too. Good business practices matter the most!
- Management team: Being a trader or investor, one will seek advantage if the brokerage’s management team has an intense desire for the stock markets and the necessary experience to be able to provide the most one-piece experience. Aptitude of the management team primarily affects all businesses, specific businesses such as stockbroking. If the management has the vision to truly enable their customers to do well, then one would benefit from it in more ways than one.
- Brokerage fee: Every rupee saved is a rupee received. For knowledge traders, lower the brokerage, higher the demand. Low charges also mean that a broker’s main focus is on scaling the business. But pay attention to other sides as well. Lower charges are acceptable, but at what cost? It’s not advisable to be penny-wise but pound silly. Double check their products and past performance before getting lured in by the alluring brokerage fee structure.
- Increasing awareness and education: If you are new to stock investing, you may not have all the details to start with. Keeping in mind the fact that the education system in India is actually uninformed on financial markets, try to pick a stock broker that takes an active interest in generating awareness among its clients. Market rules and regulations are dynamic and vary from time to time. Brokers are at the core of this information and it would be very beneficial if they can effectively transform their knowledge and information in a remarkable way. Such a broker would surely be advantage to their client.