Choosing Your Investment Broker

Buying and selling shares of stock is a great way to earn income if you know the ins and outs of stock trading. To begin this type of business, you’ll have to choose an investment broker who can execute your buy and sell instructions quickly.

What is an investment broker?

A stock broker is one who has a license to match buyers and sellers of investments by acting on behalf of a buyer or seller of stock. He or she earns a commission on buyer or seller instructions that are successfully executed.

There are typically two types of brokers— full-service or discount.

Full-service:

This traditional type of broker will work closely with you as your personal stock broker. He or she will:

* offer investment ideas

* prepare reports about your portfolio

* give you a run-down of how well your investments are doing

* be available with a single phone call or email to buy or sell stocks, bonds, mutual funds or other instruments for your account

* provide research resources

Discount broker:

This type of broker is more suitable for the do-it-yourself investor. He will not offer investment advice but will simply execute orders once you’ve decided to buy or sell an investment. Because you will do most of your trading online, a discount broker will charge significantly lower commission than the full-service type.

Commission:

This is the fee or compensation you pay a broker for successfully completing or executing transactions on your behalf. Note that commission prices can vary significantly among brokers of the same kind. A higher commission, however, does not necessarily indicate better service or faster execution so it’s best to compare broker’s qualifications, clients and services before opening an account with any one.

Any broker will require you to open an account with the brokerage firm where your minimum investment may range from $500 to $1000.

What a broker will do for you

Once you sign a broker’s agreement, your broker will:

* act as intermediary between you and a seller or buyer of stocks

* transact on your behalf

* give you advice and information, especially about the risks of an investment

* keep records of transactions and stock holdings

While most of your rights and duties between a broker and his client may be found in the broker’s agreement, state securities regulators may set mandatory requirements which a broker must observe as well.

Once you have opened an account and signed a brokerage agreement, you can now perform any investment activity.