3 guidelines for dealing with a stockbroker

Fsp Invest, 29 Oct. 2013

Tags: stockbroker, broker, discretionary, execution only, what type of broker, fee, cost saving,

To invest on the stock exchange, you must have a stockbroker to buy and sell shares on your behalf. But before you jump in, there are a few things that you need to look into before you commit. You need to decide what you want from your broker. Read on to uncover three guidelines for dealing with a stockbroker…

It’s vital that you’re happy with the stockbroker you use, Dr Steve Sjuggerud in Investment U explains…

But there are a few decisions that you need to make before you can decide on what’s right for you.

Should you go for an execution only or discretionary stockbroker?

If you’re a savvy trader, you can probably get away with just an execution only broker that answers the phone.

There’s no reason to pay big commissions for investment ideas that are not the broker’s. But for many, it’s also good to have someone to talk to about the markets and your investment goals, and that’s what you should get from your discretionary broker.

What to expect from discretionary brokers

Don’t think that a discretionary stockbroker can beat the market. He can’t. But what he can do is help with all your planning needs.

Thank about your particular situation: What are your retirement needs, and how should you allocate your assets to get there?

However, the decision, and the responsibility for that decision, is yours, not the broker’s. While the broker’s guidance can be good, be sceptical of “in-house” products they may pitch – they often carry high broker fees and don’t have great track records.

Are there cost savings using a flat broker fee or pay per trade?

With a discretionary stockbroker, the flat-fee plan aligns your best interests with the broker’s.

If you pay 1% a year, all-inclusive, you know that when broker calls, it’s because they honestly think there is a good investment for you. They only make more money next year if the value of your portfolio goes up.

On the other hand, when you pay per trade, you can’t be certain if they’re calling because it’s best for you, or because they’re trying to meet their sales goal for the month, which will pay them out a lot more money.

So there you have it, three guidelines for dealing with a stockbroker.

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