How To Choose The Best Broker

"It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." - Robert Kiyosaki

Overview

Every day we are surrounded by choices, with things, things that call for our decision, immediately or not. The moment you wake up, you decide what you are going to do next. After your meal, you are off to work or school you decide which way to take, well and good if you have your own car. When you reach your workplace, you choose to do the first one which needs your full attention. Then at night before going to sleep, you stare at your ceiling and probably deciding whether to sleep or to eat.

Out of all the choices we make, we always aim for the best one. The one that helps us and takes us on our greatest goal. But before we manage to get it, we usually do trial and error. In worst cases, the simple errors turns out to be big mistakes that we can’t undo anymore. That scenario is not strange in the world of business. There are entrepreneurs who take risks, then there is no return of profit at all. However, there are those who knows the beneficial risks, then later on becomes successful.

As time goes by, the decisions that we make gets wider and more complicated. If before, you only think about the right color for your drawing, now you might be thinking about the appropriate color for your house. If in the past you choose which ice cream to buy, now you might be choosing the one which is healthier. And, probably before you only decide what to buy with your money, now you think of ways on how to multiply the money that you have.

Apparently, money is the one we always take into consideration in making some of our decisions. For instance, you can’t just choose to buy a car without thinking about the price, unless you are the wealthiest man on earth. Let’s say, you want a certain gadget. You choose which gadget you want, but your money choose which one you can afford.

Although sometimes we work until our last breath, have a business and other things that help us to accumulate money, at some point, these are not enough. We need to take our money to the next level. We need to see it moving forward. But isn’t amazing to gain money, with a minimal effort from you? One thing you can do is to invest and find the trusted broker.

Investing might sound intimidating to some, especially if you’ve never experienced it before. But through the presence of the different online brokers, it has never been easier. Investing your money might be beneficial if you know the specifics and the in and out of it. You don’t need to be the wealthiest to be able to start an account. What matters is you have started, then your account can grow eventually

There can be risks in investing, but if you have the best broker, then you have someone on your back who will take control of the projected losses. Your broker will also guide you in determining the countless possibilities you can do with your money.

It is proper that you understand what you are getting yourself with but aside from that, you also need someone who can guide you and advise you with the correct decision to make on your money. Here is where the role of a broker comes in.

Nature of a Broker

One of the most important investment decisions that you have to make is determining the right broker. You need to find someone who will handle your buy and sell orders and will act as the “agent” for your executing your other investment activities.

A broker is the entity through which investors hold a brokerage account. The broker is usually in contact with the leading players in the major financial aspects such as banks, insurance companies, food, private companies, clothing industries and a lot more. He possesses an in-depth knowledge of the financial market.

Brokers typically earn money through the brokerage commissions which is obtained through the money from buying and or selling stocks and other related securities. The rate of their compensation is usually regulated in accordance with the custom of a particular trade or by law. It is computed either as a fixed percentage of the value of the transaction or on a sliding scale such as higher the value, lower the percentage.

They also make money from the margin interest charges. This is the interest charged to investors in borrowing against their brokerage account for investment purposes. Lastly, they gain from service charges taken from their performance and from completing certain tasks and functions.

General Types of Brokers

There are different types of brokers in the financial worldBasically, there are different types of brokers in different industries.

Online Broker

These are the type of brokers who do their job through the use of brokerage websites and present investment database information to the Client online. Specifically, brokers provide data like the graphs, charts and investment strategies.

Stock and the forex trader are sometimes categorized as an online broker in general.

Stock Broker

This kind of broker trade stocks (the bonds and mutual funds) on behalf of the Client via a brokerage account. Stock brokers can be categorized in two, namely, Discount brokers and full service brokers.

Discount brokers provide a cheap manner of buying securities for the investors who are certain with what they want to purchase. They usually charge less expensive than the full service broker because they only transact your trades, but they don’t provide advice or research. These brokers also depend on doing business in volume.

Full Service brokers offer a more personal service, like recommending specific investment strategies and plans. Their service covers retirement planning, estate planning and other long term care planning, plus creating practical investment strategies for their specific financial goals. They usually conduct a one-on-one meeting with the client, that is why they usually charge higher fees.They get compensated based on how often you trade

Forex Broker

Forex broker, referred as currency trading broker, lets the potential clients to use a demo account first so they would acquire some necessary knowledge on trading and how their system works.

Insurance Broker

Insurance Brokers are from insurance companies. They inform the Client about the best available policies, fix customer claims and gains through commission basis Most of insurance brokers deal particular type of insurance, like health, life, home and auto.

Real Estate Broker

This is one of the most common type of brokers. They serve as an intermediary between the buyer and the seller of a property. Before making deals or transactions he must have a formal license and have to pass real estate law exam. The broker is also not allowed to make major decisions on behalf of the client.

Attributes of a Broker

Not all brokers share the same characteristic, however, most of them have the same function, whether an insurance or a forex broker. Generally, they manifest the following functions.

Understand and respond to the needs of the client

A broker should meet the needs of the client. Every client might experience different things, so a broker should be able to deal with these and provide the fastest and feasible solution. A broker must be reliable and competent.

Provide related and useful advice to the client

As a broker, he should always update the client about offers and related matters. He should be able to provide risk management ideas when a client experiences unanticipated troubles before, during and after trading. A broker must provide valuable counsel, most especially to the rookies and to those who lack the experience and the time to do their own research.

Keep the client’s transactions confidential

All of the transactions between the client and the broker should be kept confidential. A broker should not disclose the financial information of one client to another.

Knowledgeable of financial markets

A broker shouldn’t only be an expert, but a licensed and professional in the world of finance, insurance, stock, forex or real state, depending on what type of broker he is. In most cases, a broker act as an investment adviser. He should be able to determine market values. There are specific licensure exam taken by most of the brokers.

Deliver superb quality of service

Brokers are also paid in the type of service they provide to the client. They should be able to deliver the kind of value they are paid for. They must keep each transaction as smooth as possible.

Criteria in Choosing a Broker

Through the birth of the online world, the authenticity of things becomes easy and at the same time hard to determine. It could be easier with the use of application and other technological assistance, nevertheless, anyone or anything can be an absolute scam.

In social media, photos and content couldn't verify one's account legitimacy same goes with trading. Due to wider competition in the market, probably you have seen a lot of prominent brokers from the print ads and the videos flashed on different websites, but you have to be careful in choosing the legit one.

Here are the lists of the things you need to consider in choosing your broker.

Minimums

The minimum is basically the amount that is required to start a brokerage account. Brokers usually have minimum balances that starts between $500 to $1,000. Other brokers require as high as $10,000 to start an account. If you want to engage in other services, you have to pay more.

Availability

Choose a broker who can be with you when you need help and guidance on the matters of your trading. A broker should be able to answer your concerns and provide the fastest solutions.

It also helps that they have high-quality of support and a 24/7 customer service who you can contact on behalf of the broker. Your frustrations with your savings can be lessened if there is someone you can call, and answers your e-mail.

Alternative Trading

Look for a broker who offers options for placing trades in times of technical difficulties. Although, almost everyone is technologically savvy. Still, there are cases where interruptions may happen.

When your internet access is down, your broker should be able to find an alternative way of trading such as faxes and on the phone trading but don't put too much reliance on

Speed

Another factor that you need to take into consideration is the speed and accuracy of your trader in executing your trades. Imagine the things you can accomplish in one transaction if your broker is fast and precise. The speed of the broker’s website matters because every second is important, most especially during the peak of trading hours. You have to take note on any lag and technical issues.

Security

Anything that is connected with money always needs an extra attention. You don’t want to see your money be gone in a snap. Online security is a very significant aspect you need to consider in choosing your broker. The majority of the brokers use security questions, passwords and PINs to protect an account.

Research and Resource

Choose a broker who provides useful resources that will help you to be more knowledgeable and will keep you updated with the recent market events than can support your decisions in the future.

There are brokers who offer tutorial videos, daily market analysis and e-books which can supplement your understanding with trading and other things.

Price

Others believe that price indicates the quality of service you can get from your broker or the services that you can get. The average commission rates for online brokers is about $20.

However, don't choose a broker who offers the lowest commission cost. It doesn’t always guarantee that the low price will give you a satisfactory result. There are specific fees for each service.

There are cases that a broker will charge expensive fees for limit orders, options and to the trades over the phone. It is better to look for a broker who charges a reasonable fee than those who offer low cost but doubtful. Just make sure that despite the price concern, your broker can still provide the service that you actually want.

Good Reputation

Make sure that you do a background check on your broker. You can check the reviews it has received and its performance. Another way to investigate the profile of your broker is through its social media accounts.

Discount and Interest

Don't be fooled with the massive discounts offered by some brokers. Look for a broker who matches your buying and selling activities with a reasonable discount and interest.

A broker should offer return on cash held in the portfolio. Beware of other brokers who keep the interest on your cash for their own sake. The return should be in accordance with the money market fund.

Banking Services

Most of the time, or probably all the time, you will deal with deposit and withdrawal processes. You need to find a broker who offers superb services on these aspects. Most of the time, a broker firm acts more like a bank

Margin

It is important that you understand the interest that your broker charges. There are brokers who require higher amounts to have a margin account. A margin account allows a client to buy stocks on credit, borrowing against the value of the securities in his account.

Trading Platform

It is necessary that you find a platform that does not freeze or worst crash during significant times such as when you need stability.

Don't judge its reliability through the way it looks or to the way you feel about it.Instead, make sure that it is user friendly or easy to navigate because the platform will play a significant role when you want to trade immediately.