Stockbrokers Trade for You

A stockbroker is an agent who does trading in stock on behalf of another person or company and charges a commission on the transaction. There are 3 types of brokers namely, full service brokers, discount brokers and banks. A full service broker executes sell or buy orders and also gives investment advice. He or she usually charges more per transaction. A discount broker executes sell or buy orders and offers no advice. They usually charges a lesser amount. Some banks and credit unions have a tie up with brokers for trading.

Electronic trading of stocks is generally done through banks or credit unions. The banks generally charge a flat rate per transaction.

To raise capital, companies sell shares to individuals and the capital raised is called stock. The values of the shares fluctuate in the market due to various reasons like macroeconomic reasons, industrial reasons, company reasons and market sentiments.

The function of a stockbroker is to find a buyer to sell the stocks of a seller. They acts as a common platform for the seller and buyer. This way the seller and buyers do not have to search for each other. For making the transaction the stockbroker charges a commission. The commission charged by the stockbroker is either a flat rate per transaction or percentage based.

Most stockbrokers also give advice on purchase/sale of stock and likely result of the transaction. Stockbrokers are sometimes called financial advisers or investment advisors. However the financial/investment advisors are different from the stockbroker in that they have to pass an examination and they have a fiduciary duty to give full disclosure to the client on commission, fees and to keep client’s best interest in view.

However a conflict of interest arises between the client and the investment advisor as for every transaction the stockbroker gets a commission. So the stockbroker’s emphasis will be on more number of transactions and not on the profit of the client. Whereas the client’s interest will be in profit and not in number of transactions.

Occasionally the client authorizes the stockbroker to sell or purchase stock on behalf of the client as and when necessary. This is done to maximize profit and/or minimize loss to the client depending upon market fluctuations.

With the advent of the internet and automated stock broking systems the client usually has no personal contact with a stock broker. The automated stock broking system obtains the best price from the market and executes the transaction. Generally a small amount is charged on the transaction. There are thousands of stock broking firms, some well known are Merril Lynch, Goldman Sachs, E.F.Hutton & Co etc.

Article Source: http://www.thearticlenet.com

Keith George always writes about valuable news & reviews. A related resource is Stockbrokers Further information can be found at Trends & News

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