Thursday, April 7, 2011

How To Use A Stockbroker

It is a requirement that a qualified stockbroker is used to buy and sell shares on the stock market. But they will do much more for you than just execute trades. They can track share prices, and advise you on potential gains to be made on positively moving stocks. A stockbroker can offer you a wide range of services and they will charge different fees for these services. From a portfolio management service at the top end to advice and share trade execution at the other these are the main services offered.

For share trade only arrangements your stockbroker will follow your instructions to the letter and execute your trades. The broker will help novice traders with jargon etc but will only execute the trade and not offer advice on it. This is generally the most inexpensive use of a stockbroker and they will often charge a commission based on the value of the trade. The basic service of trading shares on the market on behalf of investors is the most popular use of a stockbroker.

Second to offering basic trades is the provision of advice to investors. This will be more expensive than performing trades as the stockbroker is offering expertise of the market to help you decide on the best trades to make to turn a profit. The stockbroker will also spend time with you to make sure that you understand everything that is being recommended to you. This is vital if you do not have experience in share trading and the premiums for this are often a mixture of commissions and one off fees.

Portfolio management comes in two forms which are advisory and discretionary. The difference is that with an advisory service, the broker will create a proposal of stocks that are considered a worthy portfolio but they will not act on this proposal until you instruct them to do so. With a discretionary portfolio service, the broker will manage all aspects of the recommended portfolio on your behalf and provide reports on how well this is working for you.

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