Depending on the type of investing that you plan to do, you may need to hire a broker to handle your investments for you. Brokers work for brokerage houses and have the ability to buy and sell stock on the stock exchange. You may wonder if you really need a broker. The answer is yes. If you intend to buy or sell stocks on the stock exchange, you must have a broker.
To gain a stockbrokers license, there are two tests to be passed. Besides the tests being a challenge in themselves, the majority of brokers will also need to have a background in business studies, or at least some extensive financial training, perhaps with a professional degree.
Just to be clear, a broker is not an analyst. An analyst is professionally trained to examine the stock market to identify profitable stocks; a broker is just there to follow your orders and buy or sell when you tell them to. Yes, some brokers are also analysts, but not all - you need to be aware who you're taking advise from, and what their qualifications are!
Brokers earn their money from commissions on sales in most cases. When you instruct your broker to buy or sell a stock, they earn a set percentage of the transaction. Many brokers charge a flat ‘per transaction’ fee.
Very loosely, there are two main kinds of brokers: those who only handle one kind of transaction, and those who are also able to give advise, or to deal with multiple different types of investment (a full service broker). Both are usually paid on commission.
Discount brokers typically do not offer any advice and do no research - they just do as you ask them to do, without all of the bells and whistles.
So before you can start investing, the first and most important decision you need, is to decide what kind of broker you are going to ask to handle your investments. This can be a significant decision, as there is often a fee if you want to change brokers later.
If you are new to investing, you may need to go with a full service broker to ensure that you are making wise investments. They can offer you the skill that you lack at this point. However, if you are already knowledgeable about the stock market, all you really need is a discount broker to make your trades for you.
To gain a stockbrokers license, there are two tests to be passed. Besides the tests being a challenge in themselves, the majority of brokers will also need to have a background in business studies, or at least some extensive financial training, perhaps with a professional degree.
Just to be clear, a broker is not an analyst. An analyst is professionally trained to examine the stock market to identify profitable stocks; a broker is just there to follow your orders and buy or sell when you tell them to. Yes, some brokers are also analysts, but not all - you need to be aware who you're taking advise from, and what their qualifications are!
Brokers earn their money from commissions on sales in most cases. When you instruct your broker to buy or sell a stock, they earn a set percentage of the transaction. Many brokers charge a flat ‘per transaction’ fee.
Very loosely, there are two main kinds of brokers: those who only handle one kind of transaction, and those who are also able to give advise, or to deal with multiple different types of investment (a full service broker). Both are usually paid on commission.
Discount brokers typically do not offer any advice and do no research - they just do as you ask them to do, without all of the bells and whistles.
So before you can start investing, the first and most important decision you need, is to decide what kind of broker you are going to ask to handle your investments. This can be a significant decision, as there is often a fee if you want to change brokers later.
If you are new to investing, you may need to go with a full service broker to ensure that you are making wise investments. They can offer you the skill that you lack at this point. However, if you are already knowledgeable about the stock market, all you really need is a discount broker to make your trades for you.
About the Author:
This article written by Stephen Hauptman, expert trader of many years experience. If you're a new trader - or even an old hand - looking for the best share advice, take a look at his site, where you'll find the best stock market advice by one of the best in the biz!
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