When I first set my foot in the stock market world, I thought any broker will do the fine job as I was concerned about buying and selling stocks. That is the only knowledge I had at that time. Nonetheless, I selected one of the leading stock broker in India to avoid unwanted stress. But when I started trading with that broker, I observed they are charging high under the name of transactional charges which made me switch to another broker with low charges. Still, I was not satisfied as my broker had poor services.
After a few trails and errors and with the help of my experience, I found my holy grail stockbroker. Till that time, I lost a good amount of money for transaction charges as well as glitches occurred in my trades due to poor brokerage services.
To make sure, you or any new trader or investor doesn’t repeat the same mistake, I sat down to write this article describing, in detail, how to select a broker that not only serve your needs but also offer excellent services to its clients.
10 Tips to Select a Stock Broker
With each tip, I will ask you some questions. Read the whole tip first. Keep a pen and paper aside to answer the asked questions as those answers are your requirements from brokerage services. In the end, I will tell you how to put those answers for best use.
Full-Service or Discount Broker
Full-service Broker offers you all features ranging from trading to advisory services to reports on stocks. They charge higher brokerage and commission as compared to discount brokers.
Discount Brokers comes with basic services like an online portal to execute trades or finding investment opportunities on your own without any help from broker’s side. They charge lower brokerage or a flat fee per trade as compared to full-service brokers.
I didn’t know about it until I heard about Zerodha.
Traders and investors who rely on their own preparations to buy or sell stocks, generally, go for Discount brokers to save money from transactional charges. Those who need help from others for trading and investment decisions choose Full-service Brokers.
Google on “Best Stock-Brokers in India”
There are many brokers in India. You can’t knock the door of each one to check out whether they offer what you want. Better to start with the toppers list.
If you have decided to go for a full-service broker, type “Best Full-Service Brokers in India” on Google. For discount-brokers, type “Best Discount Brokers in India”.
Put the list in front. And check-out below given tips with each listed broker.
Check out the charges of each broker. They must include all the below mentioned charges.
- Account Opening Charges
- Trading & Demat Account Opening Charges
- Bank Transfer Charges
- Annual Account Maintenance Charges
- Brokerage Charges
- Flat Fee Amount
- Annual fees (if any)
Ask yourself, how much you are willing to pay? Select the few brokers charging fees as per your capability. Most traders or investors go for the lowest charges possible. Rest is your call.
Answer these questions:
Do you need desktop software to perform aggressive and quick trading?
Do you need a mobile app for trading on your fingertips?
Can you go on with website only platform?
If you want all platforms and software, choose your broker accordingly. If not, go for the one having a well-performing online portal to give you seamless experience while trading or investing.
Tools and Technical Indicators
Traders’ and investors’ needs are not limited to buy and sell only. They need all types of technical indicators supporting their decision. Of course, all brokers offer technical analysis with tons of indicators. That doesn’t mean all their offering work well. There is a difference between available indicators and their performance.
Other things traders like to add in their basket are tools for quick calculations and fast decisions. For e.g. an Intraday trader wants to calculate how much margin he needs to execute a particular trade and estimated profit he will get after all charge deductions. A fully-fledged calculator will answer these questions within a matter of seconds.
Technical indicators are not optional. Even if you rely on your broker’s executive to perform trade on your behalf, you will need indicators sometimes to take important trading or investment decision. Regarding tools, not all need it. But if you do, make sure your selected broker has these tools for instant access. You can even try these tools without opening an account with the broker as they are available online for free.
No matter if you go for a discount broker or full-service broker. At some point, you would be needing customer care help either because of technical issues or failed transactions. So make 100% sure that brokers you have selected offer excellent customer service in the time of extreme need.
How will you know that?
First option is Google it. Type “the name of broker + reviews”, you will get a list of tons of reviews and complaints. Some brokers answer those complaints and sort them out while some simply ignore them. Judge them on how they respond.
Next option is to call their customer service; contact numbers are always available and ask them a few questions. Simple questions like how much they charge, can they provide you necessary details, etc., will work. Their response will help you judge better.
Next thing to check out under customer service is how many communication modes are available with each broker
- Email support
- On-call support
- Live Chat Support
- 24/7 Customer Support
Best is the broker who offers all the above modes of communication as even you don’t know what you will need at any time. Today, most traders prefer 24/7 live chat customer services to get instant solutions for problems.
Call & Trade Service
Do you want to execute trades on your own? Or
You want someone else to implement trades on your behalf?
Of course, you have already answered that when you chose discount service or full-service broker. But today, some discount brokers do offer call and trade services. They charge some extra fees for that. As far as I know, Rs.20/- per executed trade is added to transaction cost for call & trade services.
So if you want them, make sure your broker does offer it. If you don’t want call and trade service, it doesn’t make any difference considering the fact you will never need them in future.
Are you an aggressive intraday trader who needs bigger margin leverage?
Or any leverage available is fine for you?
Or you don’t need it at all as you are a swing trader or long term investor?
Your broker selection is based on your needs.
If you want higher leverage, compare the margin offered by different brokers and select the one offering maximum margin. If any leverage is fine, make sure the broker you selected offers some amount of margin to meet your trading needs. If you don’t want it at all, no need to worry about it.
Where do you want to invest?
Is it Equity only?
Do you want commodity and equity both?
Or you want to diversify with different types of investment options?
Some brokers offer Equity investment option only while some expand to commodity and gold. Some even go higher with Mutual Funds, SIPs, bonds, ETFs, IPOs, etc.
Make your list of options where you intend to invest. Choose your broker who offers investment options as per your demands. By doing this, you are avoiding to hassles of searching for another broker in the future to invest in various segments.
Generally, brokers offer 2-in-1 account opening service which includes trading and demat account. A few brokers, especially banks with brokerage services, offer 3-in-1 account including bank account, demat, and trading account. Maybe your bank is the one.
Traders think that if they open demat account with their own bank, they will enjoy smoother money transfer process. I have worked with my bank as well as a separate broker account, I didn’t find much difference in transaction services. All of them take 1 minute for transfer from bank account to demat account, and 3 days for transfer from demat account to bank account.
The only matter to consider here is whether you want to go for a 3-in-1 account or 2-in-1. Choice is yours.
Did you answer all the questions I asked? If yes, then you have a ready checklist of your requirements. Now all you have to do is find out the broker who ticks all the boxes on your list. And you are good to go.
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