What Does a Stock Broker
Do?
You've probably seen a picture
or video of the New York Stock Exchange sometime in your life-
or any other stock exchange for that matter. When you think
back on it, your mind probably recalls something similar to a
crowded subway station- hundreds of people pushing and shoving
into each other and incessant screaming and yelling.
Hardly seems like a refined place
where business is done, right? Well, however you feel, stock
exchanges function as the backbone of American capitalism and
are very important as monitors and negotiators of the world of
money.
Stock exchanges aren't the only
place where financial business is done, though. In the past
century, normal, everyday people are becoming involved in
profitable markets by becoming individual investors of
companies by buying and selling stock.
Anybody can get in on the action, and
there is money to be made in it. That is why so many
people are getting to know the world of stocks and are
starting to do their own types of business
transactions.
But what about those that want a
piece of the action but aren't sure where to start? After all,
those economics classes you took in college weren't exactly a
walk in the park.
The world of stocks is complex and
sometimes hard to understand. Those who don't have any
knowledge of it have the door of opportunity slammed in their
face.
Luckily there are trained
professionals that can help any beginner get their own chance
at the world of stocks. They are called stock brokers, and
their job is to help you wade through the seemingly deep, murky
waters of finance.
A broker is simply a person or an
institution that is the middleman between a buyer and a seller
of. They arrange the transaction that will be made between the
two parties.
There are three types of brokers:
full service, discount, or a bank/credit union. All three
provide essentially the same services but each one goes about
it in a different way.
The full service broker is the
highest and most revered. They usually cost more every time you
trade, but are desirable for those who want more personal
service and who want intelligent investment advice that will
help them get an edge on the competition.
A discount broker has lower
quality than a full service one, but generally they cost less.
Unlike full service, they don't really offer any investment
advice but just make the transfers.
A bank or a credit union is the
third type. Sometimes, the bank or credit union will have a
mutual agreement with a full service or discount handler.
Instead of going to one of these, a person would go to their
bank and buy or sell there.
Once you pick a certain type,
there are three different types of service that the
professional can give you. They are execution-only, advisory
dealing, and discretionary dealing.
Execution-only services mean that
the broker can only buy or sell when the client tells them to.
This is the simplest of the three services because of the
restrictions that guide it.
Advisory dealing involves the
professional advising the client on what would be best to buy
or sell. They will use their financial knowledge to try to help
the client on the right path, but ultimately it's the client's
decision.
Discretionary dealing basically
gives most of the power to the professional. The client will
inform them of the investment goals that they have, and then it
is up to the broker to make all the financial decisions that
would be best for the client.
Brokers are found all over the
world: here in the United States, locations all over Europe,
and also in Asian countries such as China and Singapore. They
literally can be found anywhere where there is a chance of a
potential investor being born.
Now that you know a little bit
more about what brokers do to help their clients, you can take
advantage of their financial knowledge. With one showing you
the ropes, you can make your money work for you instead of
having to work for your money.
Jack R. Landry has worked in
financial services for the last 12 years and written hundreds
of articles about investing. He recommends
(http://hubpages.com/hub/Optioneer-Trading
) for investing
advice.
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