Making an investment in the stock market requires that you take up the brokerage service from stock brokers. Selecting the best online stock broker that aligns with your investment goals is important.
While no one can guarantee good returns on your investment in the stock market, but by selecting the right stock broker you ensure the right investment.
In this article, we have covered everything you need to look for in your ideal stock broker. It is also very important to research brokers by reading reviews on them and comparing them to understand which one best fits your needs.
Before going any further, it is always good to know which type of trading you want to do.
What Is The Difference Between Investors and Traders ?
Both traders and investors have the same goal of seeking profit through the stock market, but the way by which they achieve this makes the difference.
Traders have the goal of gaining a short term profit. Hence they jump in and out of the stock market within weeks, days or even minutes.
The traders emphasize on stock’s technical factors and not on the long-term prospects of the company.
Day traders open and close their trades within a very short span of time, which may be a few minutes to even few hours but always before the end of that particular trading day. As the speculative period of this type of trading is limited to only one day, it is called day trading. Day trading can be carried out by a full-time trader.
Swing traders buy stocks and keep it for a comparatively longer period of time which can range from a few days, weeks or even months.
Swing trading is done by investors who are employed. They carry out medium-term or long term swing trading.
Investors have a long-term outlook. They thoroughly study a company’s potential for long-term growth. The investors think in terms of years and often hold stocks although the market may move up and down. They hold their stocks for at least about 6 months or for years together.
Now that you know, what are your goals in regard to making an investment in the stock market, let us look into various factors you should take into consideration while choosing the suitable stockbroker.
Factors To Take Into Consideration While Choosing A Stock Broker
Regulation Of Stock Brokers By SEBI
The first and the foremost thing you should check is the regulation of the broker by SEBI. Securities and Exchange Board of India (SEBI) is a regulatory body of the Government of India. It controls and regulates the securities market.
It was established on April 12, 1992 under the SEBI Act, 1992. Most stockbrokers should be compliant with SEBI’s norms and normally should be registered with SEBI.
Any stockbroker providing services without getting registered with SEBI should be reported to the regulatory authorities. A complete list of brokers can be found here.
Online Security And Protection Of The Account
You should take into consideration different ways broker ensure the safety of your account and the information you share on their website. The broker should offer various security options to the investors like,
- Two – factor authentication
- Security questions
- Receiving unique time-sensitive codes via emails and texts
- Use of encryption or cookies
You should always ensure that the brokerage company should not sell your information to any third parties.
Before choosing any broker for making investment be knowledgeable about various fees or the total cost you have to incur so as to get the services offered by that particular broker. Here is a breakdown of how brokers charge their customers:
- Account opening fees
- Account maintenance fees
- Commissions for different investments
- Margin rates
- Cost for research or advisory services
You can compare the charges and offers here.
Types Of Trading Accounts Offered
You should check what types of trading accounts do the broker offers, and also the minimum investment for different accounts.
- Equity And Derivative Trading Account
- Equity Demat Account
- Commodity Demat Account
- Commodity Trading Account
- Full-Service Trading Account
- Discount Broking Account
Depositing And Withdrawing Funds
If you are planning to make the investment it is important to know how easy it is to move your funds in and out of your brokerage account.
You should know how you can deposit funds into your brokerage account and also the time duration needed for deposited funds to settle into the account.
Similarly, you should also know, the time duration needed for the fund from selling your investment to settle in your account. In addition to this, you should also make sure that the funds can be withdrawn easily.
A good broker is one that allows you to make an investment in a variety of assets, for instance, bonds, stocks, mutual funds, exchange-traded funds (ETFs), real estate investment trusts, options, futures.
Even if you are new to making an investment in the stock market, you should consider the possibility of expanding your portfolio, for which, you will need a broker who can provide you with all of the possible investment options.
The research reports allow investors to access and analyze the data on companies or sectors of interest. This service will help you to take right decisions while buying and selling your investments.
A good brokerage platform or website should offer a wide range of educational facilities for the investors. The company may offer videos, podcasts, user forums, or written articles or blogs, glossaries or how-to articles.
Take a few minutes to look into the Help or Customer service section of the broker’s website that you are considering.
Things can get tough any time thus ensuring that you can get in touch with customer service staff quickly and easily. In addition to this, you should also make sure that the broker also offers technical support.
The choice of the broker to make an investment varies from investor to investor. Thus one should choose the brokerage platform that best serves your needs.
Once you have chosen a particular stock broking company depending on your own preferences, use its services and offerings to actually make an investment strategy and make the most of all the tools and the services at your disposal.