As we are seeing lot of Discount Broker coming into picture recently. We thought to start a learning guide for same and to educate the investors about difference between a discount broker and a full service broker.
Full Service Broker:
Full-service broker is a broker who gives Stock advisory plus trading facility both to the investors.
The full-service category includes all the names that spring to mind when we think of brokers: Kotak Securities, ICICI direct, Angel Broking and others.
They provide a variety of services, such as personal advice, retirement planning and tax tips. Full-service brokers offer a wider selection of investment products such as derivatives and insurance, as well as access to the company’s research.
All this comes with a hefty price tag. Full-service brokerages are expensive, with commissions around .3% to .5% of the total amount invested by the customer. Furthermore, full-service brokers are compensated based on how much you trade, not the performance of your portfolio. This can lead to your full-service broker advising you to trade when you don’t need to.
Since they give advisory plus trading services they generally charge .3% to .5% of the total amount invested by the customer as brokerage. Suppose you buy 1000 shares for Rs.1000 each, your brokerage charge would be Rs.1000000*.5%= Rs.5000.
Discount brokerages charge a reduced commission and do not provide investment advice. The best-known discount brokers is Zerodha as of now. Fees are kept low because discount brokers offer fewer products. These are new brokers who only provide a trading platform to the investor but don’t give any advisory. The business model is built on having an effective system and quality service in order to put through the most volume.
The investor has to do his or her homework and research and can trade their services. Discount brokers usually charge Rs.20 per trade, irrespective of amount. Suppose you buy 1000 shares for Rs 1000 each, your brokerage would be flat Rs.20. That is saving of Rs 4800 in a trade if we compare it with a full service broker.
If you can do your home work of research of stocks then Discount Broker are great choice for you and it can help you in great way to reduce your brokerage charges. Only thing you should remember is that discount broker should be reliable enough. As of now Zerodha looks to be more reliable as it has highest number of traders with them, when it comes to Discount Brokers.
Bidding for Shiva Granito Export Ltd IPO, a BSE SME IPO is also going to start from August 23, 2016 to August 29, 2016. While bidding for one more BSE SME IPO Mitsu Chem Plast Ltd IPO going to start from August 26, 2016 to August 31, 2016.
Bidding for another IPO Madhya Bharat Agro Products Ltd IPO, a NSE SME IPO will start from August 29, 2016.
There are some good stocks in Pipeline this year including BSE itself coming with its own IPO. BSE will be selling its shares on index and traded on exchange.
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