BetterTrades

Broker or Online? What is the better trade-off

So, you want to trade the stock market? But in order to actually place the trade, you must decide the better approach. Do you want to hire a full-service broker or take the responsibility into your own hands through an online or discount broker? What is the better tradeoff for you? The alternatives both offer interesting choices.

In the olden days you were required to have a full-service broker in order to buy and sell stocks, make trades and swaps. There was no alternative. And it wasn't cheap, either. Some veteran traders can recall paying $75 to buy a stock and another $75 to sell it. Consider that rate versus today, where common rates can be as low as $3 each way.

Full-service brokers come with many inherent advantages, but that edge comes with a cost. It's up to each individual to determine whether that is enough to make it an intelligent financial decision. If it's best financially, then go ahead and do it.

The difference a full-service broker makes can be found in personal investment advice. The full-service broker will try to steer you away from trouble and their experience is there to prevent you from making rookie mistakes. Of course, there have been many instances of full-service brokers leading their clients toward bad or risky investments. And those guys who managed the mutual funds that lost 35 percent last year? Well, they were full-service, too.

Discount brokers don't have the time or resources to give individual recommendations. Most of them charge a basic fee for conducting the trade which an individual submits and executes online. This is preferable for anyone who is confident in their own ability to choose stocks or options to purchase. It is the best financially, in terms of fees, and can be a better trade off for someone who knows what they're doing. (Many discount brokers do have tools and information available – most for free – that will help and guide a customer through the process.)

Can discount brokers work for newcomers or do they need to comfort and assurance of a full-time broker? A newcomer can certainly benefit from using a discount broker if they will take the time to get a proper education, either by taking a class or by enriching their own portfolio with online classes. A newcomer should also start by making all their trades on paper before putting any money at risk. Virtual trading should be a part of any individual who wants to conduct business in the market. Otherwise you run the risk of losing money through sheer ignorance.

The trade-off in the discussion comes down to convenience, confidence and service. Some people want the convenience of picking up the phone and giving their order to the broker, who will execute the trade and monitor it as long as you tell them. Other people are as confident in their ability as they are in a full-service broker. The decision comes down to what is best financially for the individual. It's up to each person to determine whether or not it is a better tradeoff.

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