| You have a wealth of choices in how to buy and sell | | | | instructions. Because they don't have to hire |
| stocks these days, but you always need a stock | | | | expensive stock analysts and expensive stock |
| broker. Learn how to pick a broker who will give you | | | | brokers, discounters can charge considerably lower |
| exactly the service level you want and ensure you | | | | fees thatn full-service brokers. Most good discount |
| don't overpay! | | | | houses also offer online computer order entry |
| Due to the financial markets deregulation that began | | | | services. If you can handle ordering a book online |
| in the U.S. in the 1970's and today extends into many | | | | from Amazon, you can use these firms online trading |
| countries around the world, investors have more | | | | web interfaces - they are that easy. If you need to, |
| choices of stock brokers than ever before. However, | | | | you can speak with live brokers at these firms - the |
| with this wealth of choices comes the responsibility | | | | brokers are paid a salary usually, not commissions, so |
| (some would say opportunity!) to choose just the | | | | they are just there to help you, not to encourage |
| right kind of stock broker to meet your needs. | | | | you to make lots of trades. |
| Let's begin with explaining what a broker does. While | | | | Sound too good to be true? It isn't - you see, |
| you do choose and hire your broker, it's important to | | | | discount firms make most of their money by doing |
| remember and understand that they are, at the end | | | | business in high volumes, competing mostly on price |
| of the day, a salesperson. They work for a stock | | | | and the ease & reliability of their service. |
| brokerage house who is out to make money for | | | | A Warning |
| themselves and their sales staff (the brokers!). The | | | | If you receive a call offering you the chance to buy |
| broker's job is to carry out your transactions. Brokers | | | | shares at what is claimed a great price and that |
| are paid by salary, commissions on sales or a mixture | | | | you're going to make money quickly and the price |
| of both. | | | | might 'go through the roof', beware! This is probably |
| In the U.S., to become a broker one must first pass | | | | a 'boiler room' sales operation that is contacting you. |
| two licensing exams called Series 7 and Series 63. If | | | | Boiler rooms are sales operations that fleece the |
| they successfully complete these exams, the broker | | | | unsuspecting public by pitching them to buy stocks |
| is then allowed to advise you, solicit business from | | | | that have little merit - but that the boiler room |
| you, and to execute your transactions for you. | | | | probably bought earlier at a cheap price. Once they |
| Got that? A broker can advise you, try to sell you, | | | | get you and others to buy in, driving the price up, |
| and do your trades for you. Now that you know | | | | they sell their position and leave you with stock that |
| that, it's easy to understand the basic difference | | | | may well be worthless. Boiler rooms often break |
| between a full service stock broker and discount | | | | many laws and are always closing down one office |
| stock broker. Basically, full service brokers offer you | | | | and opening another. |
| advice and hand holding, whilst the discount folks just | | | | How to Choose Your Broker |
| execute your trade orders and perhaps try to solicit | | | | It's essential that you determine the level of service |
| more business from you. | | | | you need. If you aren't willing to do your own |
| Full-Service Stock Brokers | | | | homework on choosing investments in the stock |
| Full-service brokers usually offer a wide variety of | | | | market, then a full service broker might be for you. |
| financial products as well as investment advice and | | | | If you plan to mostly buy investments for the long |
| research. They charge higher fees than discount | | | | term and hold on to them, then you won't be trading |
| brokers. Full-service firms often offer bonds, | | | | so often and the higher commissions won't matter so |
| derivatives, annuities and insurance in addition to | | | | much in the big picture. It's not going to sound high |
| stocks. Full-service stock brokers solicit business from | | | | tech, but a great way to find a good full-service |
| you (e.g., call you up and say 'I think you should | | | | stock broker is by word-of-mouth recommendations. |
| consider buying such-and-such stock because...'). | | | | Ask your friends if they know of a great broker, or |
| Importantly, these stock brokers are mostly paid by | | | | know someone who would know a good stock |
| commissions. This means he makes money when you | | | | broker. |
| buy and sell stocks. But he doesn't make money | | | | On the other hand, if you are planning to trade more |
| based on the performance of your portfolio or group | | | | often, then you really should only be doing this if |
| of stocks making money for you! So his or her | | | | your investing your own time to carefully research |
| interests are not necessarily very aligned with yours. | | | | & choose your trades - and, in this case, |
| Discount Stock Brokers | | | | discount brokers are ideal for you. They give you the |
| Discount stock brokerages do not offer any advice | | | | lower costs of trades, which matters a lot since you'll |
| or research - they just execute your trade | | | | be trading more often. |