Pros and cons of brokers

In an era of investing, exchange is the soul and brokers and dealers are the heart and bones of the whole system. The need for diversifying the income sources is mounting to a new height. This has increased the presence of the share market in India. Share market is where buying and selling of a share happens. Share bought are a kind of ownership in that company. Buying a share is simply investing money in that company. The brokers or brokerage firms play a considerable role in the capital markets.

A broker is one who unites the buyer and a seller together or the buyer and exchanges together and vice versa. Broker is one who guides the clients with any new investment opportunities arising at every point of time. It is very important to review and know the importance of a broker. Some of them are:

  • A broker is the considered as the soul of the capital markets.
  • A broker acts as an intermediary between the exchange and the buyer/ seller.
  • A broker reviews the best investment from his analysis for the client.
  • Without broker a layman will have no clue about how, when, where and from whom to buy/sell.

There are pros and cons of brokerage and brokers. Following are some of the stated benefits and disadvantages of brokers:

  • A broker reviews the risk and return profiles of his clients and then suggests the most suitable investment.
  • The fees/ commission charged by the brokers are very nominal.
  • Having a broker saves a lot of time and makes it convenient for the clients to invest easily through brokers.
  • They keep all the transactions documented.
  • A broker provides the expertise in all the capital markets variations i.e. trading, hedging, investing and speculating.
  • A broker knowledge is not limited to only basic shares trading but also in other investment instruments like derivatives, mutual funds, bonds, derivatives, etc.
  • A broker or a brokerage firm also gives the client the option to trade on margin in which the margin is provided by the broker or brokerage firm itself so that clients can invest without maintaining the balance in his or her account.

Some of the disadvantages are stated below:

  • A broker generally charges an incentive fees based on some percentage of the profits whenever the return breaches a certain threshold level.
  • The basic fees or brokerage charged by the broker vary across the globe.
  • In greed of earning the incentive fees brokers might make some risky investments even if it is not suitable for clients risk and return profile.
  • The broker will earn the basic brokerage even if the clients suffered a loss which reduces the incentive for the broker to manage the investments appropriately.

Brokerage is a concern while selecting the broker or brokerage firm. A person should select from the top 10 discount brokers in Indiato make the investments more lucrative. Discount brokers are the brokers or brokerage firms that charge a reduced commission or brokerage on the transactions making your investments more lucrative. Wisdom Capital is one the most renowned company of India which charges 0% brokerage on the transactions from their clients.

Peter