Don’t Margin Your House Away with ETFs!
Opening an Account with a Commodity Broker
How to Trade Exchange-Traded Funds Like a Pro

What Does an Investment Broker Do?

Many investment options require that you negotiate your trades or buy and sell through a broker. A broker is essentially an intermediary between you and the investing world. Brokers can be organizations (Charles Schwab, Merrill Lynch, E*TRADE, and so on) and individuals.

Although the primary task of brokers is to act as the intermediary, they can perform other tasks as well, such as:

  • Providing advisory services: Investors pay brokers a fee for investment advice.

  • Offering limited banking services: Brokers can offer features such as interest-bearing accounts and check writing.

Brokers make their money through various fees, including the following:

  • Brokerage commissions: This is a fee for buying and/or selling stocks and other securities.

  • Margin interest charges: This is interest charged to investors for borrowing against their brokerage account for investment purposes.

  • Service charges: These are charges for performing administrative tasks and other functions. For example, brokers charge fees to investors for individual retirement accounts (IRAs) and for mailing stocks in certificate form.

Any broker you deal with should be registered with the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). In addition, to protect your money after you’ve deposited it into a brokerage account, that broker should be a member of Securities Investor Protection Corporation (SIPC).

SIPC doesn’t protect you from market losses; it protects your money in case the brokerage firm goes out of business. To find out whether the broker is registered with these organizations, contact FINRA, the SEC, and SIPC.

blog comments powered by Disqus
Different Real-Time Price Quotes for Day Traders
How to Create an Account for Your ETFs
The Basics of Placing an Order to Buy ETFs
Who Can You Buy Annuities From?
Placing Orders at the Commodities Exchange
Advertisement

Inside Dummies.com