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If you want to invest in the stock market then you need a stock broker – that is, a person or company licensed to buy and sell stocks and other securities on market exchanges such as the London Stock Exchange.
Most people use an online broker that allows them to place their trades and have the transaction be completed in seconds. That’s a huge advantage over the days when you had to get on the phone to your personal broker and explain to them what you wanted. Of course, without that personal touch you lose the advice and guidance you would get from an expert! So you might prefer to stick with an advisory broker, or even a money manager who just invests your money for you as they think best.
If you want to start trading, the first thing you need to do is choose a broker. You can compare respected brokers on our Broker Listing page.
You need to decide what kind of broker you want to use. Here are the options.
Money Manager/Fund Manager
A money manager takes on the full responsibility for investing your money and managing the portfolio of shares. You just hand over your money and leave them to get on with it; hopefully at the end you’ll get your money back plus a profit to make it all worthwhile.
A good money manager will also offer other services such as insurance, accounting services and estate planning.
This kind of brokerage account is suitable for people with a large amount of money to invest, who don’t want to be involved in the decisions about how the money should be put to work on a day to day basis.
A money manager will take a percentage of the value of your assets as a fee. This is expensive but if the money manager is a good one it can be well worth it.
Full-Service Broker
This is akin to the old-style personal broker, back when buying and selling shares was only for the rich!
A full-service broker will start by discussing your financial situation and your needs, to put together an investment plan. They will then provide recommendations of specific stocks they think will suit your investing style. You then say yes or no to their recommendations – the final decisions are usually in your hands.
For this service they will charge you a fee, but if you don’t have the time or inclination to do your own research you may think it worth paying a bit more.
Discount/Online Broker
With this kind of broker, you get no advice or guidance, no help with deciding which stocks to buy or sell. They simply take your order over the phone and execute it, or you specify what you want using their website or trading platform and the computer does the rest.
Online you are likely to have tools to help you manage your portfolio, listing the shares you own with the current price and the profit (or loss) on the trades.
The “discount” part means they charge low fees, which means less of a bite gets taken out of your profits.
Discount Broker with Some Assistance
This type of broker will offer some stock tips, usually in the form of research, regular emails, newsletters and so on. This won’t be personalised but it can help you to formulate your own investment strategy.
The charges for this kind of broker may be slightly higher than the straight discount broker.
Whichever of these types of brokerage you decide to go for, you can compare respected brokers on our Broker Listing page.
