Thursday, November 27, 2014

Picking a Stock Broker

Picking a stock broker?

Choosing a broker is as big a decision and choosing to invest in stock trading. Because the stock broker you choose is your portal into the world of trading stock, forex and indicies, and often your rescuer when things start going off track. 

It is important to remember that stock brokers study to do this job, it is a profession which requires experience and knowledge to be successful, and the majority of brokers are reliable, ethical and someone you trust your future comfort with. But you need to find the right one for you and your position, as we know every person has a different risk level in life. It is important to have a broker that understands whats important to you, your needs and your fears.


 WHAT IS IMPORTANT TO YOU

before you can consider the type of broker you want to engage you need to consider what is important to you each of the three types of stock brokers have different benefits. Before evaluating specific brokers we recommend that you 

- First consider what is import to you, 
- Second review the type of brokers, and
- Three identify those type of brokers that are available to you

What is important to you, we have created a list of the key items to consider when identifying your type of stock broker, whilst we have identified a group of items that must be consider you can always add to this list:-

STOP - Before you do anything else get yourself a trading note book, this is important, this note book will only be used form trading related matters. The types of things you will write in this note book will be, 
summarized notes on the market,
signals you are watching for on other markets or the market you trade, 
stock tips you read about or are told - write them all down and make a note why you do and don't trade them you will want this information when you reflect on your trading performance,
trades you make - including why you entered what your risks are and exit signal,
trading goals - and objective
books your recommended to read
anything else about trading, directly and indirectly related


- Cost 
Do you have a maximum broker fee you will pay per trade ($ per trade & % per trade)
Will you pay a monthly fee to have access to a broker - Yes or NO -

- Research Information
Every broker will provide you with access to research information the amount, quality and appropriateness of the information will vary
- Do you want your broker to call you when a good stock come into a Buy zone?
- Do you want your broker to recommend IPO (initial public offering)?
- Do you want to review a variety of research information across a mixture of segments and select your own stocks to buy?
- How often do you want to review research information (daily, weekly, monthly)?

Customer Service
- Do you want to talk to a person or are you happy emailing or submitting your order online?
- Are you happy searching online for answers or do you want to be able to talk to someone for a quick explanation?

How much am I willing to invest with a broker?
This is important as the amount you are happy to transfer into that brokers trading account may limit you to the type of broker.
- How much money will you invest into the brokers trading account?
- How much money will you invest in each trade?
- Are you willing to use a margin load?

Personality
If you want to talk to your broker regularly think about:-
- What type of people do you enjoy talking to about investing and trading?
- What skills or background you want your broker to have?
Remember your trusting this person with your money and your future happiness, you need to be comfortable with them.

Now that you have answered all these answers in your trading note book you can now start to consider the types of brokers available int he market.
  

TYPE OF STOCK BROKERS

When it comes to selecting a broker the criteria of each type of broker must be considered against your needs.


Full-service stock broker

Full-service brokers offer the highest level of service and are usually the best choice for less experienced investors, or an investor with a large investment fund, which typically creates difficulties in keeping track of all your stocks. They usually create and share detailed research reports on many of the larger companies as well as regular publications and updates. 

With a full service stock broker you can expect update the day something changes with a stock taking it from a buy to a sell or a sell to a buy, this can be in written or personal phone calls. You can also expect weekly (or two weekly) market and stock review, and in addition to this you will receive long term summaries and projections of where to be invested and what to be moving away from.

Top-quality broker research is generally only available to clients and includes industries and market research, as well as recommendations on your portfolio construction for your risk level and position.

Obviously this work by the broker comes at a cost and you will pay a premium, but this research regularly pays for itself not only with what you make, but also what you haven't lost. These type of broker typically only work with large size funds, but there is always a small full service brokerage firm looking to grow with medium sized clients.

Discount stock broker

Discount stock broker is exactly that, discount, so it comes with a lower level of personal attention and care, the research information at your disposal will also be lower.

As a result to obtain the same result as the full service you need to commit more of your own effort and knowledge. Typically the news letters and market updates provided are much more general and will require you to do additional research to determine if they the stock fits into your risk profile.

Be mindful to review update schedule of stock recommendation, and before to contact your broker if you believe the position is changing or changed, while you are paying for a basic service, be sure to use it where you can.

Internet stock broker or self serve stock broker

Internet stock broker or better describer self serve stock brokers are exactly that, they will provide you with online login details to your trading account so that you can manually type in the amount of stock to buy or sell and the price you will sell or buy at. 

With your online login will also be access to their market research, while this information is general a large self serve broker can often create excellent market data and recommendation. But much like the discount stock broker you are on your owner even more alone in determining what is within your risk level and you need to be sure to monitor the position of the stock is in when you buy, so that you can identify the change early and respond.

The timeliness of self serve stock brokers research information can vary greatly some update stock position and recommendation daily, while others are weekly or monthly, be sure to know their updating schedule before you start using them for recommendation.


PAIRING YOU WITH YOUR TYPE OF BROKER


Now we have an understanding of whats important to you and what types of brokers are available you now need to find the best match for you. Be careful in making this decision, you need to make a decision for the long term.

Selecting an online internet broker or discount service broker
Due to the self serve nature of both internet broker and discount service broker the review and selection processes are simple and very systematized.

Firstly you need to clarify the items on importance to you, research information supply, access to issuing trades, availability of funds and withdrawal process.

Then you need to contact your research online and with your friends and family and find out who they use, what they like about it and what they don't like to create yourself a shortlist of brokers. 

Once you have your shortlist you need to start working thought your criteria to determine to best meets your criteria.

Once you have determined who best fits you, its time to start the process of opening the account, this can typically be conduct online which will come with access to a variety of research information immediately and the ability to start trading in a couple of days.


Selecting full-service stock broker

Shortlist stockbrokers 
If this is your first broker it is probably appropriate to choose a general broker and not necessary someone who specializes in selected industries. When your portfolio grows or you determine that there is an industry with potential you can then consider engaging a a second broker to manage part of your portfolio.

When selecting your broker you will need to speak to more than one broker to find one who is right for you. If you are after research, start with the major firms, build a list in your trading note book. Once you have done some online general online research start talking to your friends and relative. Find out who they use and what they really think of them and what type of success they have had.

When your obtaining feedback from friends and family, be sure to ask some question about the customer service, but also be sure to ask about their trading needs. While they are a good broker for your brother or sister, they don't always make for a good broker for you.

Now that you have created a shortlist of brokers from a variety of sources, start screening.

Screening the prospects
Contact the broker firms you are interested in and book a phone meeting, and talk through your needs as a trader and what you value in your broker. They will probably ask a few questions about the types of investments you want to make and tell you something about their service. This is important to be honest as the broker want a good relationship as much as you do.

Explain your financial position and the types of investments you wish to make, and don't be afraid to ask if they deal with clients like you. If you are part of a similar group they will be able to use their search hours to benefit more clients at once. This is a smart business move for the broker and a smart business move for you.

Generally, broking firms segment their client bases and some prefer not to deal with smaller clients, or may offer them a lesser service, this is fine but understand where you will fit.

If you are comfortable with the answers, make an appointment to see an adviser in person, it is important to do a phone meeting first. If they don't seem like the right fit they probably aren't so move on. Don't be afraid to cross someone off your list.

Interviewing the broker
Legally a client must know and understand you before they can recommend anything for you to buy or sell. So prepare to be investigated and interrogated and ask about the investments you want to make, your current financial position and your goals, they will probably also ask some life position questions, so be prepared and be honest.

It is important to be clear in your mind, before the interview, what you want to achieve from investing. The broker will also be forming a picture of what type of client you are, how often you are likely to trade and what amounts of money will be involved.

This is why you have a trading noted book  so you don't be court up in the moment. If you are looking to make small transactions, say so. If you are a long-term investor rather than a trader, make that clear. There is no point telling a broker you are one thing when you are another. 

Golden rule of the interview, make your decision 3-5 days after the interview. Don't get swept up in the moment.

Getting the Service you agreed to
Now that you have selected a broker to who have an aligned set of expectation it your responsibility to work on making sure the broker works to those expectation and it is also your responsibility to read and review all the information you broker gives you. After all, you both agreed to a set of expectations and these go both ways.

If your broker has undertaken to contact you regularly with fresh share recommendations and early warnings of trouble and that is not happening, pick up the phone and find out why.

We recommend that you first review the expectation you set in your meeting, are you investing as much as you advised, are you making the types of decisions you indicated you would? If your investment plan and needs have changed, meet with your broker be honest and check that you are still the right match for each other.

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