How to choose the right broker for investments?



How to choose the right broker for investments

You have decided to invest in securities – this means you cannot do without a broker: according to the law, it is impossible to trade on the stock exchange without an intermediary. Therefore, transactions can only be concluded by legal entities with a brokerage license – banks, investment, and brokerage companies.

Why do you need a broker?

To decide whether a broker is right for you, you need to understand what you require from him.

A broker is a professional intermediary in any transaction. Whether it is insurance, the purchase of the real estate, or a loan, he connects the buyer and the seller and receives a percentage (commission) for his services. The intermediary takes care of the legal formalities, bidding, and negotiations. His primary function is to create the most favorable conditions for his client.

Accordingly, the stockbroker is a professional intermediary at the stock, currency, or commodity exchange. He can only be a legal entity with a special license, for example, a bank, investment, or brokerage company. The duties of a stockbroker include:

  • registration of the client at the exchange;
  • informing a client on the course of trading;
  • purchase and sale of financial instruments at the direction of the client;
  • payment of taxes on transactions;
  • keeping and submission of reports.

This is the obligatory minimum offered by everyone. However, you can choose a broker that makes deals and shows reports. In addition, some companies provide trust management, analytical services, and free investment training.

What you should pay attention to

License

This is the first thing you should check: without a license, no company has the right to conduct operations on the exchange. Checks are conducted regularly. If it notices violations, withdraw the permit. In such a case, the broker is obliged to suspend operations and return the funds and securities to the clients.

Reliability

A broker, as well as any financial institution, may go bankrupt. Or lose their license. To avoid problems, contact a trusted broker. How reliable the broker is, apart from having all rights, you can determine with the help of the rating. Notable organizations – rating agencies, assign ratings.

You can also pay attention to the broker’s position on the stock exchange. It shows how big the broker is. Finally, pay attention to the documents that disclose the data on the volume of client operations and the number of registered and active clients.

Markets

Clarify the markets available. If you want to invest in foreign markets, find out what assets the broker has access to. 

Suppose you’re new and haven’t figured out which securities you need. In that case, you can invest in ETFs (funds that hold a portfolio of assets and trade them in installments) or in a ready-made portfolio with predictable returns and risk levels.

Fees

It would help if you studied the cost of the broker’s services. For example, how much will the broker charge for the transactions you make? For example, account opening, payment % of marketing, % of turnover, a fixed amount per transaction, a fixed amount per period, charges for deposit and withdrawal, and other paid services of the broker.

Convenience

Please pay attention to how easy and fast it is to open an account and buy your first security from a broker. The broker’s handling of the withdrawal transaction to your bank card, if necessary, is also not unimportant. Unfortunately, VTB investments are very far behind by this parameter.

Not all brokers have a convenient mobile app. It often happens that the app hangs or updates the quotes with a considerable delay, up to 20-30 minutes, which is not good.

Training

If you are new to the securities market, a little education on the subject will come in handy. Many brokers offer webinars, seminars, and personal consultations. Classes may be paid or free, and sometimes brokers hold promotions and give away paid courses. 

The clients’ feedback

No one canceled the reviews, although we all understand how they are written now, so this point comes last. The most real reviews and comments about the broker and its app are better to read in the app store.

Additional benefits

If you have to choose between two brokers with similarly favorable conditions, it makes sense to evaluate the convenience of the account.

The first thing worth checking is the level of technical support service. Find out in what format the specialists communicate with the clients: phone, mail, online chat. Assess how well this suits you. Ask 3-5 questions. On how quickly, politely, and understandably you will be answered, you can judge the other quality of service.

The interfaces of the broker’s website, personal cabinet, and programs and applications that you will use while working with the broker, should also be clear and convenient. But, again, this is an obvious indicator of the client orientation of the chosen company.

Pay attention to the quality of the training materials on the website (if they are available, of course). Webinars and lectures for novice investors are often conducted by brokers who advise clients. Any visibility will generally be a plus: this reads openness and concern for their reputation.

Investing

How to start investing in Fairmarkets:

  • Decide on the amount you will invest.
  • Study the offers of significant brokers, what commissions they charge, whether they help newcomers.
  • If a particular broker advises you, check if he has a license.
  • Make a contract with the broker you choose to replenish the brokerage account.

Conclusion

Choosing a broker today is a serious task, one might say, almost without the right to make a mistake, which means that you have to consider several factors, which we have described here. 

And do not fall for the usual marketing ploys, when free services for the first month are offered, the first loss refunds, if they happen, and so on. That’s all fine, but the broker for the job has to be the best. And not just the first month.

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