Deciding on a Brokerage

Handling investments in the stock market is some very tricky business. Thus most people rely on those who make it their trade to handle investments- brokers. And brokers work for brokerage companies that can buy and sell stocks on the stock market. If you are thinking of investing in the stock market, rid yourself of all illusions of doing it by yourself. A broker is not optional- he/she is required to do business on the market.Stockbrokers are licensed, and obtain their license by having to pass two very difficult tests. Not only that, but they must have a background in finance/business, with an appropriate degree (Bachelor's or Master degree).

Often, a broker is confused with a stock market analyst, which can be said to be two very different animals. An analyst analyzes a stock market, examines trends, and uses complex mathematics with a full examination of all numbers to predict what the market will do in general, and how specific stocks might do. A broker only buys and sells stocks for his employers- without any expert opinion on the stocks in question.

So how do brokers make money? They make commissions (in most cases) from sales that they make. The buying or selling of a specific amount of stock allows a broker to take a percentage cut of the total financial action that a person is taking. A number of brokers simply charge a straight out/flat fee "per transaction."

As is the case with most things, there are more than one type of general brokers: Discount brokers and full service brokers. Discount brokers usually don't offer any type of advice- they do what you ask without any of the extras that a full service broker offers. They are also, obviously, cheaper.
Full service brokers offer more options for investment, and give advice for investments, and take payment in commissions. They often also even perform research for their clients.

Thus, the biggest decision an investor faces is the type of broker that they want. Will you shell out the big bucks, or take your chances on yourself? Are you willing to take that sort of a financial risk and put that much faith in yourself? New investors are typically advised to take on a full service broker so that they make relatively wise investments. They offer the experience/skill that the new players of the market don't have yet. The experienced usually prefer the discount brokers since the full service don't say anything they don't already know.