Choosing Stock Brokers
Not all stock brokers are the same. Choose your broker carefully
Like any other market, the stock market facilitates transactions by bringing buyers of shares and sellers of shares together. However, when the average shareholder places a trade, their buying or selling is typically carried out on their behalf by stock brokers who act as middlemen.
Using an online brokerage
While it remains true that the most common means for buying stocks is
via the use of stock brokers, the stock brokerage industry has been
transformed by development of the internet over the past decade.
In general, there are two broad categories of brokerages. The first
group comprises 'full-service brokerages' that offer advisory
services and often manage client accounts. These tend to be relatively
expensive and you would often need to have a substantial minimum account
size to get access to their services. In the years before widespread
public participation in share ownership, full-service brokerages were the
prominent middle-men on the stock exchanges.
At the other end of the spectrum lies the other broad group: 'discount brokerages'. As their name suggests, these are
usually cheaper than their full service counterparts but the price
comes at the expense of the personal attention that you may expect to get
from the full services brokerages.
Many of the discount brokerages offer internet-based execution-only
services where they simply carry out the actual share transaction and
nothing more. This can often be done at very low costs.
Overall, while both types of brokerages can now be found online, the
discount brokerages have benefited the most from the expansion of the
internet. Nowadays, you can buy shares at a fraction of what it used to
cost to make such transactions.
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