Traditionally, the only sources from which a new investor could get a broker were through broker rating guides and customer feedback surveys. This simple means are getting far outdated, especially in this information age, and better approaches need to be adopted. But the guiding principle to be upheld all through the process of choosing a broker should be to identify that particular broker who is optimally and specifically suited to your investment needs.
A perfect broker will always be available to answer your calls, spend some minutes explaining the new complex stuff, charge moderate commissions, and then look out for you when something worth considering is coming up, or when hell is just about to break loose. Additionally, you need a guy who knows the game, who has the training and the experience, and fully certified by all relevant bodies. You will be wise to insist on this, otherwise you will get yourself into a mess with crooks. It is therefore important to identify that broker who has a record of outstanding services, satisfied clients, and a reputation of character and virtue. When it comes to your hard earned money, nothing is too cautious, nothing is worth a reckless risk. So walk out and talk to the clients and know what they feel about the broker you have identified.
So let’s say you are just getting started on choosing a broker, the perfect broker for your investment needs. Start by asking yourself these fundamental questions: How much is the amount of money you have set apart for investment? This helps determine the broker to choose – the more money you have the better. Next, what kind of investment are you interested in? Average brokers have access to popularly traded stocks, but for rarely traded issues and or mutual funds, a full service broker is the best choice. Thirdly, how often do you intend to trade? Brokers earn their commissions with other account fees from trading frequently and thus your trading frequency will be a criterion for choosing the broker with minimal discount charges given your trading frequency. Finally, how green are you in the block? This question helps determine the amount of help, attention and coaching you require. Your broker of choice should be able to facilitate this.
There are four types of investors and each has a category of brokerage needs. Decide on which type you belong first and you will be a step closer to finding an investment broker to suit your needs. The first type of investor is the micro investor, most of whom are starters in the game. They usually have minimal amounts of investment capital to use as a learning rope towards greater pastures. These types require a full service investment broker to guide then through the investment maze. The second type of investors are the buy-and-hold investors who lead very busy lives elsewhere, leaving no time for hustling on the floor.
These investors need a broker specialized in such investment portfolios like mutual funds or any other stock holding that varies little with time. These types of brokers are called the limited stock brokers. The third types of investors are the active traders, who have been on the floor for a while. They know their way around, have cashed and bought several issues and are presently spending most of their days poaching for trading deals that can make a profit. These guys have a very high trading frequency, and are always looking out for a transaction that can leverage them higher every single day. As such, they need a minimally charging broker on both fees and commissions, so as to keep their profit margin relatively respectable. Again, they require a fully fledged brokerage unit, which has fingers looped around the entire investment market.
[ad#downcont]The next type of investors requires a discount investment broker, with no time for small talk or advice, and giving only the most specialized attendance and only on particular projects. These are the big-wheel investors who know their way around the stock market. Their capital is high and in volatile markets. They can calculate for themselves the MFI or SRI of any stock holding and make shrewd decisions in time. These guys walk with their palmtops and laptops with which to watch market trends throughout the day, and make contacts with brokers several times in a few hours.
After identifying your type, it is now time for choosing a broker ideal to your investment needs. Surf the net, seek friend’s recommendation, walk the floor and see the active brokers, access the official websites of professional and self help associations of brokers and then identify the one broker who is the perfect broker.