What online brokerage houses do including the pros and cons of using their services and selecting the best ones
Online brokerage houses have become popular as a result of the increased number of traders and investors who favor online trading over traditional floor trading. The advantages offered by Internet-based trading have convinced a lot of traders and investors to conduct businesses online which effectively leads to increased demand for online brokers.
Pros and cons of using online brokerage houses
As with online trading, using the services of online brokers has its own pros and cons. The main advantage, of course, is accessibility. An investor can easily access his firm anywhere he is and at almost any time of day. The speed of transaction is also a plus when it comes to hiring online brokers.
In terms of disadvantages, some market practitioners believe that online brokerage firms and brokers do not provide the personal service and attention that a traditional broker can give. Most investors are also left to their own devices to make all investment decisions without the benefit of talking to a floor broker who can analyze trends with them. For an investor who has not mastered the ins and outs of the stock market, this could be a problem.
Types of brokerage firms
A brokerage company can either provide full service or discount services. A full service company offers various financial products and a more extensive list of services compared with discount brokers. Full service firms not only offer financial instruments like stocks and bonds, they also offer investment advice and can conduct market research for their clients.
Full service firms charge higher fees than discount companies and are mostly paid by means of commissions. These firms will charge a client based on how often their services are used, regardless of how good or how bad the client's investment is performing.
Discount broker firms, on the other hand, do not provide research services or offer advice; they just take care of trade transactions in behalf of their clients without getting involved in the decision making itself. These types of brokerages charge fixed fees and rates and earn profits based on the volume of business they handle.
Selecting the best
In choosing an online brokerage, a trader or investor should consider the fees charged and whether these rates are commensurate to the services that the company offers. In addition, the firm should be able to respond quickly to customer queries and offer easy-to-understand instructions on how to conduct business with them. A strong reputation and a solid background are also a must for a stock broker company.
Online brokerage houses differ in the services they provide and in their payment structure. For your own good, conduct a research on a company's background before making the decision to acquire its services.
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