When you start investing in stock market, you come through the word, “Broker” very commonly. Though by the word, this concept may seem complicated and overwhelming, which its not. Brokers are just individuals working as agents to help investors by intervening in the transactions made between the stock market and its participants. In a stock market, someone can’t just enter and start trading. The transactions here can only be done by registered platforms. These brokers are registered members under the regulatory body of the stock market, which is SEBI ( Securities and Exchange Board of India). Thus, a broker is essential to make any retail exchange in the stock market.
The business of retail brokerage is today divided into two categories : Discount Brokers and Full-service brokers. A investor needs to pick among the two. But before doing so, investors must compare the services and facilities provided by them. They must understand their features and compare their clauses of minimum opening balance and also their charges. Discount broking is for those who want to take trading experience with a nominal investment while full-service brokers help those who are planning to invest big amount and are into serious investment plans.
Traditional brokers also known as full-service brokers are those who provide both trading and advisory facilities. They deal in all trading options that stock market offers, i.e., stock, shares, commodities, currencies, etc. They charge commission in terms of percentage which is calculated on the total amount of trade. They operate from many offices and usually have various branches spread across the country. These branches/offices are open fir clients to visit in case of any query or help.
These brokers are new entrant in the stock market. The concept of discount broking is not as old as the traditional brokers. This concept is mostly an influence of internet. These brokers are only providers of a platform for trading and not for any other advice or help. Thus their charges too are lesser than full-service brokers. They offer a trading experience at industry’s lowest cost i.e., Rs.10/trade, in all options like derivatives, currencies, equity and currencies. This charge is same for any amount to be invested.
In last few years, discount brokers have established themselves in the industry and are giving tough competition to the traditional brokers.
Advantages Of Full service Broker
- They not only provide a trading platform but other services like tips, research, portfolio management, and many more.
- They also provide their clients a relationship manager.
- They have many offices spread across the country and a well established network.
- They are best for delivery based trading.
- Client can anytime visit these offices for any query which makes them easily approachable and trustworthy.
Advantages Of Discount Broker
- Charges are comparatively very low.
- They offer various brokerage plans like monthly plan, per segment plan, per trade plan.
- They are best for intraday trading
Disadvantage of Full Service Broker
- Intraday day becomes unaffordable.
- Negotiation in brokerage is possible only when the trading volume is very high.
- The relationship manager are also just interested in generating brokerage.
Disadvantage of Discount Broker
- No offices or branches may be available in your city as they do not have a wide spread network.
- Only a customer care number is available for any query.
- No other advice, tips is provided.