Various Types of Brokers That Exist in The World of Stock Market

The basic definition of a broker is, “an independent or an entity that organizes and executes financial transactions on behalf of third-party.” The transaction can be performed across a wide range of asset classes. It includes stocks, forex, real estate, and insurance. A broker will charge a commission for facilitating the transaction. Some brokers will provide you with market research and give you suggestions on the products you want to buy or sell. It depends on whether they are a full-service broker or execution-only. Regardless, a broker should be licensed to give advice and execute the sale. The trades are executed when the customer gives a go-ahead and not before that. Let us now look at different types of brokers:

Brokers are broadly classified into two categories. However, today for the sake of detailed understanding we will look at a couple more.

Stock Broker: A stockbroker or an investment broker manages and executes trades on the stock market. Since an individual cannot buy or sell shares directly on the stock market; you need to avail the services of a stockbroker. The broker will execute the trade on your behalf.

Forex Broker: A forex broker purchases or sells currencies on your behalf. The benefit of a forex broker is 24 hours accessibility to currency pairs across the world. These brokers try to minimize the cost due to the competitive nature of the market. Transactions in the forex market take place in pairs. For instance, you will either purchase or sell a GBP/USD together.

Full-service Brokerage: A full-service broker offers more than one service. It includes retirement and investment planning, tax advice, market research, etc. It is ideal for someone with a shortage of time on their hands. These brokers generally work for a fee that is higher than other broker fees. The primary difference between a full-service broker and other brokers is the number of services offered by them.

Discount Brokerage: A discount broker charges a lower fee. They do not offer services like market research, planning, suggestions, etc. They will only execute on your behalf. The more number of trades will lead to a lower commission fee. However, this is not a universal fact. It varies from broker to broker. Anyone who goes for this broker will have to manage their portfolio.

In the end, the choice of the broker should be based on your need. It should not be based on what the market says.

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