Choose a Stock Broker - Key Points to Remember

How to choose a stock broker

To invest in the stock market, you need to have a DP (depository participant) account and a trading account. These services are offered by a stock broker (SB). Basically a stock broker is an entity through which investors buy and sell shares. There are many stock brokers in the market. Each SB has its own unique offerings of services. Before you choose a stock broker, few points you should consider -

1) Know your stock broker - Gather information about the SB - When the brokerage business started, background of the owner/promoters, how strong is the brand of the SB, was the SB involved in any controversies.

2) Account Opening Charges - What is the account opening charges? Check the account opening charges by other brokers also.

3) Stock Broker Charges - A SB charges can be broadly divided into two main categories - a) Stock trading charges and b) Maintenance charges

a) Stock trading charges - There are two types of charges for trading in shares. a) Delivery Charges and 2) Intra day Charges. Delivery means if an investor takes delivery of the shares, it is called as delivery of shares. Intra day means if the investor buy/sell shares on the same day. Delivery and Intra day charges are different and vary from broker to broker. Check the delivery and intra day charges with the SB and also found out how much other SB charge.

b) Maintenance charges - Every year, the SB charges maintenance charges in order to maintain your account. Do check the maintenance charges and compare with other brokers maintenance charges.

This is the most important criteria for choosing a SB as the account opening charges is a one time expense whereas stock trading charges and maintenance charges are recurring. It is always advisable to select a broker whose trading charges are competitive vis-à-vis the other brokers in the market.

4) Stock broker services - Broadly the SB services can be divided into two categories - Online and Offline services. You can buy/sell shares by calling up your broker (offline) or through online. Online trading means you can buy/sell shares through the internet. Check with your broker if they provide both the services or not. It is always advisable to choose a broker which offers both the services.

5) Investment research and stock information - Brokers also provide updates and information on stocks. Check the past record of the broker in providing excellent tips and information on stocks. Based on their past success stories, you can zero in on the broker.