Online Stock Brokers Part 1: Broker Role
When you are ready to dive in and start investing in stocks, you first have to choose a broker. It’s kind of like buying a car: You can do all the research in the world and know exactly what kind of care you want to buy still, you need a venue to do the actual transaction. Similarly, when you want to buy penny stock, you task is to do all the research you can to select the company you want to invest in. Still you need a broker to actually buy the stock whether you buy over the phone or online.
The Broker’s Role
The broker’s primary role is to serve as the vehicle through which you either buy or sell stock. When I talk about broker. I am referring to organizations such as E-trade, interactive broker, Charles Schwa, Merrill Lynch, and many other organizations that can buy stock on your behalf. Broker can also be individuals who work for such firms. Although you can buy some stocks directly form the company that issue them, to purchase most stocks, you still need a broker.
Although the primary task of broker is the buying and selling of securities (keep in mind that the word securities refers to the world of financial or paper investments, and that stocks are only a small part of that world) such as stocks, they can perform other tasks for you, including the following:
Providing advisory services:
Investors pay broker a fee for investment advice. Customers also get access to the firm’s research.
Offering Limited banking services:
Brokers can offer features such as interest-bearing accounts check writing, direct deposit, and credit cards.
Brokering other securities:
Broker can also buy bonds, mutual funds, options, Exchange Trade Fund (ETFs), and other investment on your behalf.
Personal stockbrokers make their money from individual investors like you and me through various fees, including the following:
This fee is for buying and or selling stocks and other securities.
Margin interest charges:
This interest is charged to investors for borrowing against their brokerage account for investment purpose.
Service charges:
These charges are for performing administrative tasks and other functions. Brokers charge fees to investors for Individual Retirement Account (IRAs) and for mailing stock in certificate form.
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