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The Pros And Cons Of Discount Brokers

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By Author: balaji venkat
Total Articles: 6
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Pros
One of the biggest advantages of working with a discount broker is that the investor can save a lot of money on transactions. When working with a full-service brokerage, investors usually have to pay high amounts of money in commissions to brokers. These commissions might be a flat fee or based on the volume of the trade. By working with a discount broker, an investor can save lots of money and increase profits.
Another advantage that you get by working with a discount brokerage is safety. If the discount broker or brokerage firm can afford to reduce commissions, this means that they are making up for it in bulk. The most recommended discount brokers are usually, going to be very large companies. Meaning that your investment is going to be safer with them than if you choose a small brokerage company that is relatively unknown.
Discount brokers operate in a more straightforward manner, offering investors a trading platform for them to make the trades of their choice. They don’t offer advice and guidance. Allowing you - the client to decide what transaction you would like to make, discount brokers are there typically to facilitate that transaction.
Discounts brokers offer quality, efficient service that enables their customers to buy and sell investments easily.
Cons
With a discount broker you do lose out on the advice you are entitled to when using a full-service brokerage. However, several online discount brokers have a variety of trading and researching tools which can, in part, offset this disadvantage.
Using a discount broker, you might also risk giving up some features and services that a full-service brokerage provides. With a discount broker, you might not be able to invest in as many different types of securities as with a traditional broker, focusing mainly on the most popular types of securities. This is going to restrict your options and could affect your profits in the long run.

So then how do you choose the best Discount Broker?
Listed below are a few important factors that will help you decide on the best Discount Broker, that meets all your needs :
Rates - While researching you will see for discount brokers focus on the price-per-trade. Choose a discount broker that provides lowest price-per-trade.
Other Fees - Beyond the price-per-trade, brokers may also charge other fees, including fees for closing an account, transferring assets into the account, IRA custodian fees, account inactivity fees, wire transfer fees, annual fees and charges for not maintaining a minimum required balance.
Customer service - Knowing the kind of customer care service that the brokerage firm offers is an important aspect. While researching, you will certainly want to see how the brokerage does at sending you all the vital information you ask for online.
Investment product selection - All discount brokers will offer stocks on the major exchanges although choices such as government bonds, options, corporate bonds, and the like are not available through every brokerage. Determine what you expect and need.


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