The requirements of the investors from their brokers may vary from person to person. Some may require various services and facilities offered by the Full-service Brokers, or others may require only the online trading platform of the Discount Brokers, through which they can easily carry out the buying and selling of the stocks.
For selecting the right broker according to your own requirement, one must have proper knowledge about various types of brokers. In this post, we will throw light on discount brokers and which type of traders should open an account with them.
What Is Meant By A Discount Broker?
A discount broker is a stockbroker who facilitates buying and selling of stocks at a very minimal brokerage as compared to that charged by the full-service broker.
However, it should be noted that a discount broker does not provide any financial advice and research reports or any other kind of financial consultation. Most discount brokers work with a flat fee structure, meaning they charge lower brokerage than other full-service brokers.
The discount brokers provide investors with brokerage accounts through which they can execute various orders. The investors do not have any interaction with the broker and even if they have it is very minimal and only limited to execution of the orders placed. They only execute orders on behalf of investors through their online trading platforms.
Best Discount Brokers in India
Widely known as the first discount broker in India offering a maximum of Rs 20 brokerage irrespective of the value of the trade. They have been a pioneer in the discount broking space paving the path for others to follow suit.
Founded in the year 2015, 5Paisa is the leading discount broking firm based out of Mumbai. It provides its services in the Online Trading, Insurance, and Mutual Funds domain.
Founded in April 2013, SAS Online is relatively new to the stockbroking space but has made huge strides by acquiring clients at a very fast pace.
Wisdom Capital is an upcoming discount broking firm with its major focus on providing a high amount of leverage to its clients. Being a discount broker, it also offers low brokerage charges to its clients which are competitive on comparing with other discount brokers.
Upstox is one of the leading discount brokers with more than 2 Lakh active clients trading with them. They are known for developing in-house trading platforms for their clients.
Founded in 2012, Samco is one of the leading discount brokers in India allowing its customers to trade in Equity, Currency and commodity segments.
Founded in 2016, Prostocks is a discount broker who allows its clients to trade in Equity, Currency, Commodity and Derivative Trading segments.
Trade Smart Online
Another low brokerage offering discount broker in India. Trade Smart Online, a subsidiary of VNS Finance has also become an important player in the discount trading business.
Similar to a few other discount brokers, this also offers different brokerage plans for low and high volume traders.
Discount Broker Is Suitable For
Discount brokers are suitable for,
- Investors and traders who actively buy or sell stocks in large quantities, as the brokerage charged by the discount brokers is lower when compared to that charged by the Full-Service Broker.
- Investors who are very knowledgeable about the stock market and investment as a whole so that they do not require any sort of advice or consultation from the broker.
- Discount brokers only facilitate the buying and selling of the stocks; hence, they are suitable for investors who do not want to diversify their portfolio.
- Investors who just want to buy or sell the stocks that are all.
Advantages Of Discount Broker
- The transactional fees that are charged by the discount broker are very low as compared to the transactional fees that are charged by the full-service broker. This is possible because the investors trade in larger volume.
- The brokerage fee that is charged by the discount brokers is at the lower side which helps the trader or investor to breakeven and convert their investment into profit quite quickly.
- Discount Brokers offer one of the best online terminals to their clients that too free of cost.
- There are no hidden charges involved and assurance of 100% transparency in the cost of discount brokers through Brokerage Calculator, Margin Calculator, Charges Sheet, Trade Confirmation.
- Discount Brokers facilitate the financial education of their clients by offering free online educational video tutorial for their client so that the client can educate themselves and associate with them for a longer time. The full-service brokers do not facilitate educating clients.
- Discount brokers offer hassle-free and paper-free account opening. All that the client has to produce is their Aadhar number and the account can be opened in just 10 minutes.
- There is no such thing as Minimum Brokerage, thus if you want to buy or trade-in various stocks discount broker is best for you.
- Discount Broker charges their clients flat brokerage charges irrespective of Trade volume whereas full-service broker charges brokerage based on the volume.
Disadvantages of Discount Stock Broker:
- Most of the Discount Brokers work through their online trading platforms therefore if you require to visit the branch of the broker there are no such provisions. However, few discount brokers offer branch support as well.
- Discount Broker does not appoint a relationship manager for its clients like the Full-Service Broker. Therefore if you need experts advice or require a dedicated person who can manage your portfolio, then this facility is not provided by the discount broker.
- Discount brokers only facilitate the buying and selling of the stocks. Thus the investors are not able to diversify their portfolio by investing in various financial products like IPO, ETF, Mutual Funds, etc.
- The discount brokers do not offer 3 in 1 account opening. ( banking, demat, trading ) Unlike Full-service banking broker Discount broker don’t offer 3-in-one (Banking + Trading + Demat) account opening.
Top 5 Tips To Select Discount Broker
- Most of the discount brokers display on their website various charges that their customers have to pay. You can easily compare various charges of different discount Broker.
- The discount broker mainly works through the online trading platform thus one must check their online trading platform and also the terminal software they offer to the investors.
- Although most of the discount brokers work exclusively through an online trading platform, there are some discount brokers which also have physical branches mainly in the major cities. You can always go and check out their branches.
- Before investing all your hard-earned money with the discount broker you should always check the risk management system of the broker.
- Always check the reviews of the other investors regarding the discount brokers you have shortlisted. It will give you the real insight into that particular discount broker.
Although the discount brokers charge a very minimal brokerage fee, the services provided by the discount broker are only limited to buying and selling of the stocks.
Thus, one should very well know their requirements as an investor and then only go ahead and select the brokers accordingly. If you wish to open an account with a discount broker, then just fill up your details in this link.