November 22, 2020

How to choose the right broker

broker

It is possible to increase own capital not only at the expense of usual bank deposits, commercial real estate, apartment rent, differences in currency rates or gold prices. Dividends from securities as a source of income attract more and more attention every year. However, it is impossible to buy them directly; for this purpose investment companies (brokers) are needed. We will tell you How to choose the right broker and not to risk your money.

Who is who on the stock market?

The structure of the stock market includes the official representation of the state, which regulates its work, and its participants:

  • brokers – directly sell and buy securities: stocks and bonds;
  • issuers – enterprises that issue securities; 
  • stock exchanges – places where trading takes place;
  • depositories – keep securities and keep a register of their owners;
  • investors and traders – persons buying securities with the purpose of earning money either by reselling them or by receiving dividends.

Upon signing an agreement with a brokerage (investment) company, the individual shall have access to all opportunities of the stock market and may buy stocks, bonds and other derivative financial instruments, such as futures, options and investment certificates without limitations.

Broker selection rules

Now let’s talk about how to choose a stock market broker, what to pay attention to.

  • Accreditation at the stock exchange. If the trader is not listed in the lists of members of this organization, you can not buy securities on this market. Besides, if an investment company assures you that they work with such exchanges, and you do not find any supporting information on their websites, it is a reason to think.
  • Availability of a website with reports on activities. At the same time, pay attention to the date the materials were posted.
  • Availability of information about the trader on the official website. This way you will understand that there are no frauds behind the company, and all permits are in order and up to date.

Tariffs for brokerage services

As a rule, the remuneration of the investment firm shall be made up of a certain percentage of the amount of transactions. Tariffs are set forth in the contract and may include:

  • commission for sale (for example, 0.1% for transactions with stocks);
  • the cost of servicing the securities account;
  • fee for the use of specialized software;
  • fee for the service of placement of securities in the depository;
  • fee for withdrawing funds or crediting dividends to an individual’s account with a bank, etc.

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