Discount stock brokers are those that execute trade for less brokerage commissions when compared to full service stock brokers. Discount stock brokers are used by many investors owing to their less cost. Thus individual investors with less capital can use the discount stock brokers at their best.
Before online transaction technology, only investors with large wealth were able to afford a stock broker. But with the development of technology brokerage services were provided online. This is how discount stock brokers came into existence.
However, when it comes to services, discount stock brokers provide much less services when compared to full service stock brokers. A full service stock broker provides services like financial advisory, tax tips, and lot other. They even manage the entire portfolio of its customer. But discount stock brokers are different. They don’t provide any advisory or manage any asset. They don’t do any research either. All that they do is buy and sell orders.
With such limited services you may wonder why people go for discount stock brokers rather than full service stock brokers who do all you need in an investment. Of course there is one reason to consider-cost. Discount stock brokers are cheaper. An investor can save a lot of money if he chooses a discount stock broker from a full service stock broker. This amount can be used for other investments. But apart from that there are other reasons. Discount brokers provide order execution for their customers. Choosing between a discount broker and a full service broker depends on the knowledge an investor has on stock investment and his needs. Investors that trade frequently find discount brokers very useful. Investors who have a good knowledge about trading go for discount stock brokers just to execute their trade. These investors don’t need much advice in trading. They are very much skilled in trading. Due to lower commissions they trade often.
There are two categories in discount stock brokers by the way they charge the brokerage:
Fixed rate per trade:
These brokers charge fixed rate per Trade. They are relatively low.
Fixed rate per month:
These brokers charge fixed monthly fees with unlimited trading.
On comparison price per trade is better than price per month. Go for brokerage that provide low price per trade.
Another reason why investors go for discount stock brokers is safety. If you choose the discount brokerage firms that are most recommended you can have your investment at its safest.
Discount brokers offer trading platforms to their customers to help them to trade. They focus on efficient services for the customers to conduct their trade in a way they wish. Mostly, these types of brokers are for those who would like to do their trade independently. An investor who does not want someone else to alter their plan goes for discount stock brokers.
However, discount brokers have some disadvantages too. This because you may not be able to enjoy the services and the features in the services provided by the full service stock broker. Most importantly, you won’t have anyone to advice you in financial terms and in making decisions. You need to solely rely on your own skills for these. Still, you will have a variety of trading and researching tools to help you out in trade. The tools give you a hand in your research, helping you to analyze and come out with the right decision. With discount stock brokers you may not have a variety of securities to invest in. but in full service stock brokerage there are a lot of security options for you to invest. In short this will restrict your options and affect your profit.