Tips Choosing a broker

Depending on the type of investment you plan to make, you may need to hire a broker to handle your investments. Brokers work for brokerage firms and have the ability to buy and sell stocks on the stock market. You may be wondering if you really need a broker. The answer is yes. If you intend to buy or sell shares on the stock market, you must have a broker.

Stock brokers must pass two different exams in order to obtain their license. 

Choosing a broker

These exams are very difficult and most brokers have a background in business or finance, with a bachelor's or master's degree.

It is very important to understand the difference between a broker and a stock market analyst. An analyst literally analyzes the stock market and predicts what it will or will not do, or how certain stocks will perform. A stock broker is only there to follow your instructions to buy or sell stocks... not to analyze stocks.

In most cases, brokers make their money from commissions on sales. When you ask your broker to buy or sell a stock, he earns a certain percentage of the trade. Many brokers charge a flat “per transaction” fee.

There are two types of brokers: full service brokers and discount brokers. Full-service brokers generally can offer more types of investments, can provide investment advice to you, and are usually paid in commissions.

Discount brokers usually don't give any advice or do any research – they just do what you ask, without all the bells and whistles.

Therefore, the most important decision you need to make when it comes to brokers is whether you want a full-service broker or a discount broker.

If you're new to investing, you may want to go to a full-service broker to make sure you're making smart investments. They can give you the skill you are missing right now. However, if you are familiar with the stock market, all you really need is a discount broker to do the trading for you.

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