Buying and selling stocks of various companies, bonds and many other types of securities such as commodity futures and derivatives consumes a normal day’s entire stock trading scenario in a stock exchange. Brokers facilitate these deals on behalf of clients that would otherwise become overwhelmed by the complexities of the trade.
What does the broker do?
Brokers passing the Series 7 exam, also called the General Securities Representative Examination administered by the Financial Industry Regulatory Authority (FINRA), are eligible to buy and sell securities through registered brokerage firms.
- They basically advise their client the appropriate time to sell or purchase stocks and bonds.
- They charge a flat rate per trade or a percentage of the trade as done by the bigger players like Merrill Lynch, an arm of Bank of America or Morgan Stanley Smith Barney.
- They can lend you money where you may need funds to leverage investments, charging a margin interest rate.
- A Certified Financial Planner would be well versed in estate planning, portfolio asset allocation, tax planning and legal compliance and be able to discuss investments in business and real estate.
With Online brokerage you can trade from home
Banks are intermediating a great deal in stockbroking and are providing efficient online brokerage services that enable you to stay home and enter particulars of the stock, quantity and price, and buy stocks right away. These services are cheaper too.
The grey areas in a broker
Hiring a traditional broker can have its disadvantages, and one of them is that they may be fixated on certain companies while ignoring many that are more efficient. They may not have your interests upper most in mind while trading. They are most likely to call out of the blue and compel you to move in and out of stocks instead of suggesting a well thought out trading operation. There are many simple relaxed storefront brokerages that give you hands on experience without the constant drone of high pitch sales promotion that can give you outstanding investment advice backed by solid experience if you are lucky enough to locate such folks.
If you are adventurous you can always do it all by yourself
If you realize that even the most analytical brains have often read the market wrongly, perhaps you may be tempted to handle things by yourself. A DIY approach is actually a great way of learning and nothing can beat the experience that time and losses and gains will teach you. You can start slowly, drive carefully through the maze of investment options, gradually diversifying your portfolio and building some solid earnings, before digging deeper. Again, you need not feel isolated, there are many online resources that will speed learn you through the stockbroking jargon, and seminars round the clock that will give you a different perspective. Your colleagues, peers and your boss could give you some tips to help you on your way.
What you can do to give investments a gentle boost
You have hired a broker and you are very happy with the way your portfolio is growing. It may have come to your notice that many a time the broker suggests moving into different stocks that have great potential, but what kept you back was paucity of funds.
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