Basics of Stock Market 14: Discount broker, full-service broker and what are the brokerage charges
Let now see who are these brokers in the stock market. To know the process of buying and selling shares where brokers are involved, I recommend you read the article on Different accounts needed for trading.
Stockbrokers can be classified into 2 types: Discount broker and Full-Service broker. Choosing the right type of broker as per your trading style and requirements will help you get the most out of trading.
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Now since everything is online, all trading of buying and selling shares is done online now. Hence, the benefits, advantages, and drawbacks are all connected with online trading. Brokerage firms are getting famous in India and the competition is also on the rise. The competitive pricing ultimately comes down to the amount of brokerage a broker takes while selling a share. You lower this, and the broker becomes more attractive. But for some, the added benefits which come with a broker are also the factor in choosing a good broker.
Discount brokerage service provides you with the basic tools you require to trade on the stock market, with minimal to no additional services. Full-service brokers offer additional services with the basic tools which become attractive to the person who doesn’t have time to do research about the market. Let’s look at the two types of brokers in India.
A full-service brokerage firm offers guidance and advice on how to invest your money, how much to invest and where to invest. They also offer portfolio management services, which means a professional will be making sure your portfolio is frequently updated and trimmed accordingly. This trade-off is the increase in fees you pay, as you are essentially hiring someone to do the advisory and trading for you.
These brokers suggest quality stocks for their clients. The service and advisory which they provide are what the client pays for. Hence, they always look into a more qualitative approach than a quantitative approach.
Example: Geojit, Motilal Oswal
A discount brokerage account is what you will opt for when you’re looking to learn the stock market by yourself and start your investing and trading career by learning and doing by yourself. Since you’re doing all the research and trading, these brokerage firms have very limited transaction fees, brokerage, and Annual Maintenance charges. This way, you can apply your learning and expertise to save some bucks on additional services.
These brokers usually look for a quantitative trade. Since the brokerage is less, brokers make their clients take a greater number of trades to gain profitable brokerages from traders. Taking a trade or not is always our choice, brokers don’t push for it, but the only way for discount brokers to be profitable is through a greater number of trades. Discount brokers look for quantitative trades rather than qualitative ones.