Almost every investor or trader in the stock market needs to open up a brokerage account with a brokerage company or a firm; but here are some very important aspects discussed that you should be aware before opening a brokerage account with a broker.
1. Type of broker – there are two types of brokers right now. They are (1) Full services broker and (2) one service broker.
Full services broker will offer you all the services of broking, giving investment advice preparing reports for you, one on one call with regular broker and so on. In exchange full services broker will charge higher commissions.
On the other hand one services broker will only buy shares for you and nothing else. Yes, of course one service broker will charge less commission as compared to full services broker.
Now, as per your requirements you should choose which type of broker you want.
2. Minimum opening balance, commissions and maintenance charges – minimum opening balance varies from broker to broker of which you need to take care before opening a brokerage account. Different brokers charge different commissions, fees and maintenance charges. There might be a very big difference among different brokers for same type of transactions. The difference could arise due to type of broker and any additional services they are offering. Therefore you need to check out and compare brokerage firms in order to choose the best.
Maintenance charge is also an important question to think upon. As almost every brokerage firm charge annual maintenance charge you need to think upon it. The difference is that some will charge higher and some will charge lower. The lower charging ones may have higher commissions and higher charging ones may have lower commissions.
3. Additional benefits – today almost every broker provide additional benefits due to competition in the market. The thing here to look up is choosing benefits according to your requirements. Some of the important tools a basic broker will provide you are online trading, telephone ordering, faster execution of orders, and annual ledger of your trading. You need to look these benefits before opening an account with a broker.