What is a Stock Broker?

I come across several novice investors all the time who are not sure either why they need a stock broker or they just don’t know which broker fits their needs. Lets first start with understanding what a brokerage firm does. A brokerage firm is essentially an entity that has legal permission to trade stocks, options etc. It is not possible for a common man like you and me to go to Wall Street and buy stocks. Brokerage firms perform the actual transaction on behalf of its customers.

Another service provided by brokerage firm is stock analysis, investment advice and consultation. There are a lot of economic indicators that can help you predict whether stock should go up or down. They are not always correct but more or less give you an idea about what to look out for. If you are a person who needs advice it comes at a fee. Most people prefer their gut feeling and judgment rather than get advice.

Because of the above two functions brokerage firms employ two kinds of people one called trader who help the firm to buy and sell shares. The others are analysts who do backend research to identify good stocks and suggest them to clients for a fee.

Brokerage firms make money by charging different fees to consumers who use the above two services. Fees vary based on the level of service. There are two kinds of brokerage firms; the first provide full service i.e. an investment advisor provides consultation on a one-to-one session, it can be via chat, phone or in-person. In such discussions they usually tell you how you should invest your money and how to maintain your portfolio. These companies charge very high fees and are preferred by heavy investors. Another kind of brokerage firms are discount brokerage firm like TradeMonster or TradeKing. They charge minimal fee and provide great service to a customer. For most people our advice is to do daily research on stocks through Google search engines and invest their money through a discount brokerage firm.

Brokerage firms run special offers throughout the year to attract new customers. Some firms offer big sign up cash rewards just for opening new accounts. If you are just trying your luck for the first time, these offers can prove to be very helpful as you don’t have to shell out your money for first few investments. Some of these offers have been listed @ Special Stock Broker Offers