One of the kids in our office said “I can write well”. To me that is like music! So I said, ok write an article on ‘how to select a good broker’. This is what she wrote…Please read it carefully, and read my comments below the article. Do not take it seriously, it is the effort of a kid…

Finding the perfect broker!

With a plethora of online brokers cropping up all over, it is surely an exasperating task for an individual investor to decide which broker would be the most cost-effective! There are people who advice you on broker choices and instead of resolving the situation they add to your misery. Selecting a right broker has to be a customized process precisely because one has to take into account certain factors before opting for a broker:
•    The type of investment vehicle you intend to trade- stocks, bonds, mutual funds, indexes, options
•    The amount of your investment
•    The type and amount of research material you want, customer service, website design and layout, and trading reliability.

It’s important to know what type of investor you intend to be. Do you plan on being an active trader with numerous trades per week, or do you plan on being an index, mutual fund type investor who prefers to leave and then forget it. These things matter because many brokerages charge fees and commissions that differ depending on how much you invest and how frequently you trade.
What to look for when you choose a broker?

Dividend reinvestment plans (DRIPS). These allow you to automatically reinvest dividend into stock, avoiding brokerage fees while building up your shares.

Low commissions Broker commissions vary wildly. Some brokers charge a very high commission, whereas some charge less. Low/high commissions alone don’t tell the whole story—companies with low commissions may charge hidden fees, while those with high commissions offer other perks that make up for the high trade price—but they should be one of the first things you consider in selecting an online broker.

Fees: Fees, especially when they’re hidden, work against you. Yet all brokerages charge them—they have to make their money somehow. Fees will eat into your precious investment fund. Understand how they work before selecting an online broker.

Account minimums. Some brokerages offer rock-bottom commissions irrespective of what amount you keep as minimum account balance. Yet they advertise these commissions in a way that makes you think they’re for everyone, even small-time investors. One must look at the asterisks and fine print before falling for clever marketing speak. And also look out for fees if your account falls below the minimum balance.

Reputation. Also one must ask friends, family, and colleagues for their opinions on brokers.

Level of service Online brokers charge different rates for phone orders and broker-assisted orders. Moreover, brokers invest varying amounts of energy into customer service. At minimum, one must look for reasonable level of customer service, including instant messaging, fast phone responses, and accurate responses.

Evaluation of broking firms:
On the basis of the above comparative analysis of broking firms, we can say that in terms of trading for delivery for a turnover of less than 50 thousand, Angel Broking charges the least amount of brokerage. But apart from the brokerage one needs to consider the above mentioned factors as well while opting for a broking firm. But when there is a turnover of an amount greater than 50 K, the other firms like ICICI Direct, Kotak Securities, HDFC securities offer lucrative brokerage charges in different slabs. India Infoline would be preferable when it comes to intraday trading. But of course there are others which offer slabs.

Note:

Sadly this is the kind of writing one gets, normally.  Clearly this is a cut n paste from some US based article! She has used words like ‘commissions’ (we say brokerage, the Yankee says commissions), she talks about a concept called DRIP (surprisingly not yet offerred by any brokerage-bank combination, no clue why), using terms like 50k in an article is shocking is it not?, the full article has so many American terminology that it sucks…look at the word indexes (UK English should have been indices – is this a reflection on the English Medium school she went to?) or is it just lack of learning I am not sure…

I think she no longer reads my blog (I presume!!), so it is fine even if she sees this article…I do not want you to take this article seriously please!