A large number of small investors trade and invest in the financial markets hoping to earn attractive returns and profits. Stockbrokers assist investors in undertaking their transactions on the stock market and buy and sell shares and other financial instruments on behalf of their clients. Some stockbrokers also offer advisory services, assist customers with IPO subscriptions, invest in debt funds, and other financial instruments. There are many brokers and sub-brokers available, offering a wide range of services to small traders and investors. The selection of the right stockbroker is a critical decision that can impact the gains and returns of small traders and investors.
Here are some factors small traders and investors need to look into before selecting a stockbroker.
Background Check of the Stock Broker
Conducting a background check of your short-listed stockbrokers is vital. A background check can involve checking the past performance of the broker, their registration with SEBI, their online reviews, etc. A proper background can help small traders and investors to safeguard themselves from fly-by-night brokers, cases of fraud and cheating, etc.
Minimum Balance Requirement
Almost every brokers and broking firms have their minimum balance requirement, which needs to be deposited at the time of account opening and maintained during the operation of the account. It is critical to compare the minimum balance requirement across different brokers and broking firms as it can help you free some of your capital for other activities.
Customer Service
Customer service and timely availability of a broker refers to offering advisory services, providing suggestions, and answering queries promptly. Prompt and appropriate customer service is vital in making trades at the right time towards ensuring optimal returns on the capital invested.
Cost of Commissions and Other Fees
Each broker, sub-broker, and brokerage firm has different fees and charges for commissions, brokerages, and charges for the services. Commissions and brokerages are charged on each transaction carried out by the customer, and these charges and expenses affect the returns of the traders and investors. This makes comparing the commissions, brokerages, and other fees charged by different brokers and broking firms and before finalizing their broker.
Hidden fees and Charges
While many broking firms can advertise low rates commissions and brokerages, they can have a multiple of hidden fees and charges which a trader notices only after undertaking a transaction. Hidden fees are often not communicated at the time of signing the customer, and these charges and fees are mentioned in fine-print in lengthy agreements.
As these hidden fees and charges can adversely impact your returns on your trades and investment, customers need to analyze and evaluate different fees and charges levied by brokers and broking firms.
The Verdict
Every investor and trader has a different financial goal, and as a result of this, no single broker can cater to the needs and requirements of every type of trader and investor. While discount brokers can be suitable for day-traders and part-time investors having substantial knowledge of the financial and stock markets, full-service broking firms are much more ideal for investors and traders who require constant support, advice, and guidance of the brokers.
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