For investments in stocks, one should have broking account. This can be opened at any brokerage house. Hence one should take almost care with whom you are opening your account with. This impacts your overall returns, ease of doing business with and increasing your wealth in long run through proper guidance and research.
There are two types of brokers
A) Full service – They provide a variety of services like buying, selling, IPO investments, demat account opening, research, advice on market trends, retirement planning, tax planning etc. They charge brokerage as a percentage of trade value and are bit expensive compared to discount brokers.
B) Discount – They provide basic necessary facility services like buying and selling. They charge brokerage on basis of per trade and are cheaper compared to full-service brokers.
Before hiring services of any type of brokers, you have to decide how often you will trade. If you are investor and trade very rarely than take services of the full-service broker but if you trade very frequently than better go for a discount broker.
Before finalizing any broker there are certain points you should analyze. One should also have Indian stock market overview before analyzing the broker.
- Stockbroker reputation
If the stockbroker is highly experienced and has up to date knowledge of present market trends and inner working, you will be saving quite a few bucks in a long run. To list these types of brokers you can go through official website of SEBI and few stock investment websites. One must also see any issues of complaints or check on their reputation from personal experience of other investors in the market who are/were in contact with the stockbroker.
- Brokerage fee
Fees like the commission, account opening, transaction, maintenance, transferring money, etc should be taken into account and should be compared with other brokers along with services in each category provided. These fees are associated while working with the broker. For few transactions per month/year, one should opt for brokers who have low maintenance fee and for very frequent transaction per day/month one should opt for a low transaction fee. These fees will impact your overall returns.
- Technology and software tools
Brokerage firms are increasing capacity and speed by using advanced technology. They are also using these technology models and developing such software tools for market research which gives them more and more perfect trends and up to date information on market conditions to take better and reliable decisions. Choosing these types of brokers to help you make an informed decision and because of speed, real-time executing of your trade will be possible (especially for day traders).
- Your investing type
If you are a day trader, where your trading volume will be high, a flat fee on transactions which are low should be preferred. Better choose discount brokers.
If you are an investor, who holds his script for a considerable period of time, low maintenance fee brokers should be preferred. Better choose full-service brokers.
- Local office
If you prefer to talk to an advisor, face to face or on phone for buying/selling your script see to it that brokerage firm has an office or a franchise in your city/town. But if you are comfortable with doing things on your own then local office or franchise does not matter. Certain brokers have online facilities can be used from anywhere in India.