What are brokers and how you can benefit from them A broker, usually working for an investment firm, acts as intermediary between the individual wanting to invest in a stock, or invest in various investments such as future.
Brokers as intermediaries between the customer and the exchangeBrokers exist because it's not possible for the individual to directly buy stocks or other investment tools. Only members registered with the various stock exchanges are allowed to place orders. Why not? Why not cut out the middle man? Why do stock exchanges insist on orders being placed through a broker? First of all, instruments of investments such as stocks are heavily regulated. There are rules, for example, prohibiting insider trading and the manipulation of stock prices. How do brokers and their firms fit it. By requiring stocks and investments be purchased through a brokerage firm, important, behind the scenes information is funneled to the Securities and Exchange Commission which regulates stocks.
The role of brokers in leverging stocks.In addition, an important part of investing in stocks is the ability to borrow money from your broker in order to purchase stock. It varies according to the firm, but normally once you deposit upwards of $20,000 into a margin account, you can typically borrow up to 50 percent of your available balance. Say you have $15,000 if available balance but want to borrow $5,000 more because you "know" in your heart of hearts it's a guaranteed winner. If the stock goes up, then it's no problem. But if the stock goes down, you will be required to cough up a margin call, so the brokerage firm is not on the hook too much to cover you loses. And by the way, most margin accounts allow the firm to sell your stocks to make up the difference if you don't come up with the cash, often without consulting you. Making sure that every investment is covered with the necessary cash is important to the exchanges who operate on a "clear all accounts process." By not holding brekorb5 days per year, and it's up to the brokerage firms to do all the police work.
Brokers often dish you financial adviceOf course, brokers and brokerage firms (like Libertex or Nsbroker) don't just process transactions all day and collect commissions as a result. While some brokerage firms provide very little, the vast majority of brokerage firms offer a ton of investment analysis and tools for the investor to do self-analysis on investments. Full-service brokers provide a wide variety of investment advice, that may make the difference between buying intelligent stocks and not. Using full-service brokers rather than discount brokers, typically you pay a yearly fee of around 1 to 2 percent for the full-service brokers help in managing your account. Although full-service brokers cost more, the financial advice goes beyond mere stock trading. Personal financial planning, insurance, estate planning, retirement planning, accounting services, and tax advice can be offered, many of those services partially reducing the need to rely on accountants and insurance agents for advice. Discount brokers, on the other hand, charge less commission but tend to provide tools for investment without the human touch that full-service brokers offer.