Transacting Your Financial Business through Discount Investment Brokers - dummies

Transacting Your Financial Business through Discount Investment Brokers

Perhaps you’ve researched investment options and have chosen your preferences among stocks, bonds, treasury issues, funds, futures, and other financial tools. All you want is someone to transact your buy/sell orders. In that case, go with a discount broker.

Discount brokers, as the name implies, are cheaper to engage than full-service brokers. They don’t offer advice or premium services, though — just the basics required for performing your transactions.

If you choose to work with a discount broker, you must know as much as possible about your personal goals and needs. You have a greater responsibility for conducting adequate research to make good stock selections, and you must be prepared to accept the outcome, whatever that may be. Because you’re advising yourself, you can save on costs that you would have incurred had you paid for a full-service broker.

There are two types of discount brokers: conventional discount brokers and Internet discount brokers. Conventional discount brokers (such as Charles Schwab) have national offices where you walk in and speak to the customer service staff face-to-face. You can transact in person, over the phone, or through the Internet. Internet discount brokerage firms (such as E*TRADE) have essentially the same services except for the walk-in offices and face-to-face communication.

Both conventional and Internet-based discount brokers share many of the same primary advantages over full-service brokers, including the following:

  • Lower cost: This lower cost is usually the result of lower commissions.

  • Unbiased service: Because discount brokers offer you the ability to transact your buys and sells only without advice, they have no vested interest in trying to sell you any particular security.

  • Access to information: Established discount brokers offer extensive educational materials at their offices or on their Web sites.