HOW TO SELECT A SUITABLE STOCK BROKER
As there are 100’s of discounts and full-service brokers are available around us, it will be a difficult task for the newcomers to select a suitable broker.
Your success and profitability always based on the service, brokerage, and other charges which your broker charges for trade. It is ideal to select a broker who will align with your investing goals and provides the educational and support needs. As there is no guarantee that the stock which we make the entry will provide us the returns, but we will have better returns if we choose a broker who suits us, provides us the right recommendation, affordable brokerage, and other charges.
In this article, we will cover, eight general self questions which we can ask ourselves before selecting the broker and 15 key things newcomers should consider in selecting an ideal broker for investment and trading. Below is the list of things needs to consider in the selection of a broker.
- Years of service
- Stock Recommendation.
- Account Opening Charges
- Leverage& Margin
- Auto square
- Mutual fund & SIP
- Market closing timing
- Customer care
- Bank to trading account fund transfer
- Account closing
LIST OF FEW SEBI REGISTERED INDIAN TOP STOCK BROKERS
We can categorize the brokers as full service and discount service. Below listed stockbrokers allow customers to trade in both BSE and NSE stock exchanges. Now, most of the full-service brokers are coming up with discount brokerage plans to acquire more customers.
The most popular full-service brokers.
- ICICI Direct.
- HDFC Securities.
- Angel Broking
- Axis Bank.
- Kotak Securities.
The most popular discount stock brokers
- Angel Broking.
QUESTIONS NEED TO CONSIDER WHEN CHOOSING THE BROKER.
Now trade and investments are made easy and inexpensive through the online trading platforms of brokers. In General, the selection of a broker should be based on your mode of investment, which you want to follow, like active or passive. For active investors, ideal to select a discount broker, and for passive investors, the full-service broker will be an ideal choice.
- For Intraday traders, discount brokers will be ideal and for long-term and short-term investors, full-service brokers will suit more.
- If you’re just starting out, It is ideal to select a broker who provides online or offline support.
- If you have the experience, select a low brokerage broker who provides a sophisticated trading platform and basic support service.
- It is ideal to select a broker who provides professional fundamental and technical analysts data for the customers.
- Need to select a broker who provides maximum features in the trading platform.
Below are the minimum features every trader and investor needs to look at in a trading platform.
- Advanced real-time charting capabilities.
- Conditional order options.
- Trading options in derivatives, commodities, and fixed-income securities, as well as stocks.
- Easy option to invest in different mutual funds and SIP.
- Stock and Mutual fund performance analysis and recommendations.
Be honest with yourself in the matter of your knowledge in the investment journey and where you want to go in the future. Below is the list of questions you can ask yourself to gauge your knowledge level, before selecting a suitable broker. Once you have the answer, you can select a suitable broker on the basis of your need.
- What type of trades do you want to execute, Intraday, or Deliver?
- Do you need a broker who provides a broader range of technical and fundamental resources which help you to identify suitable opportunities?
- Do you in need of leverage and margin trading facilities?
- Do you need conditional order and automated trading options for trading?
- Do you need customer support from the broker to execute the trade?
- Do you in need of study materials from the broker?
- Are you confident of using the online platforms of the brokers to take the trade?
- Do you in need of call and trade options for trading?
15 KEY THINGS TO CONSIDER IN SELECTING THE BROKER
Below are the 15 things a trader or an investor needs to consider about a broker in the selection process. Need to select the broker on the basis of your financial goals and based on your knowledge in the domain of trading and investment. It will be difficult to get a broker who meets all the below-mentioned selection criteria, but you can select a broker who can meet the most.
Years of service:
- If a broker is in this field for a long period of time, investors can confidently select the service from them.
- Also, investors can choose a broker on the basis of the credibility of the promoters, if it is a new broker.
- SEBI will allow only the brokers who meet the Eligibility Criteria to become Stock Broker, hence we can ideally trust all the listed brokers.
- Select the discount or full-service broker as per our financial goals and knowledge in the domain.
- If we are confident of doing ourselves, it is ideal to select a discount broker, if not better to select a full-service broker, as they provide handholding support to the customers in trading.
- Need to select the broker on the basis of our application of trading and Demat account.
- If only planning for the investment, select the broker who provides the least brokerage for the delivery order.
- If Planning for Intraday trading, select the broker who has flat brokerage.
- Need to select a broker who provides the Best stock trading app for beginners.
- The speed of the trading platform of the brokers is an important factor need to consider.
- Select the broker with an advanced and Best trading platform, with higher speed.
- If the plan is for Intraday trading, speed of order execution is a critical criterion. For delivery orders, speed is not so critical, however need to select a broker who provides a trading platform, which will not hang during the peak trading time.
- For newcomers, recommendations from the broker will be an advantage for their trading career.
- Few brokers provide the stock recommendation free of charge and others charge nominal fees for these services.
- Better to select a broker, who can provide basic stock commendation free of charge.
Account opening charges:
- Different brokers charge different account opening charges, some brokers provide free account opening and a few provide free account opening offers.
- Once we select a broker, we can negotiate with some brokers for the account opening charges.
- Select a broker who can support us to meet our investment goals, account opening charges, which we can consider as secondary for those brokers.
- AMC is the annual maintenance charges of the brokers, for the service which they offer to us.
- Some brokers, provide the first year free AMC.
- Select the broker who has the least AMC as yearly we need to pay this cost, even if we are not trading using the account.
Leverage & Margin :
- Leverage and Margin are the amounts which broker loan to the customers for trading.
- Leverage is the amount that brokers provide for Intraday trading. Select the broker who provides the maximum leverage.
- Margin is the loan amount for the delivery order. Brokers charge interest on the loan amount. Select the broker who provides maximum leverage and the least interest.
- In general, the brokerage will be charged in the percentage of trade value or on the basis of a flat rate for a trade.
- Ideal to select the broker, who charges the least brokerage for delivery order and Intraday.
- If our goal is for only investing, we can select a broker who provides the least brokerage for delivery orders.
- Discount brokers usually charge flat charges for each trade.
Auto square off:
- Auto square off is the process of automatically squaring off the trade position after the market hour if the open position trader is not squared off by the trader.
- Some brokers charge a nominal charge for the auto square off service.
- Ideal to select a broker, who provide this service free of charge.
Mutual fund & SIP :
- Most of the brokers provide Mutual fund & SIPinvestment options in their trading platform.
- Always better to select a broker who provides these services at a nominal charge.
Market closing timing :
- Some broker closes their trading time in their portal earlier than the normal market closing time.
- Ideal to select a broker who provides maximum trading time to the customers.
Customer care :
- Some brokers provide dedicated relationship managers to handhold the customers for trading and investment.
- Some brokers provide customer care support only at the trading time and some provide customer service for extended hours.
- It is ideal to select a broker who provides quality customer care service for extended hours.
Charges for Bank to trading account transfer :
- Some brokers provide a 3-in-1 account, which means, the bank account will provide along with the trading and Demat account and some will provide only the trading and Demat account and customers can link it with any Bank account.
- Most of the brokers provide free transaction charges between the trading account and the linked bank account and very few brokers charge nominal fees for transferring an amount from a third-party bank account.
- Ideal to select a broker who provides these services free of charge.
Account closing :
- Some brokers, allow customers to close the account online and some brokers demand customers to submit the physically filled account closing form in their office to close the account.
- Always better to select a broker who allows the customers to close the account very easily and provide the support to transfer the balance holdings to another account.
It is difficult to get a broker, who matches all the above-mentioned selection criteria. It is ideal to select a broker who matches the maximum criteria and who can support us to meet our financial goals. An investor should put their time, energy, and effort into the selection of the right broker as they put it for the investment planning, as service and support of a broker is a critical factor, in achieving goals.
To become an investor or a successful trader, it is ideal to just start with where you are right now and move on to the next step of an investment learning curve.
Before you click on any broker account opening link, take a moment to think about your financial goals and what are the important criteria which you need to consider for a broker. Take thought to our decision and select a broker who can matches more.
Thanks & Regards