Choosing a Stock Broker

Choosing a stock broker depends on the type of service you would like to receive from your broker. A stock broker is someone who is licensed to broker stock between average people and the market makers at the stock exchange. A stockbroker usually works for a larger firm that has elite access to the markets. It is impossible for the average person to get a seat on the stock exchange without paying millions of dollars for a seat, thus stock brokers are the only way to get into the stock market.

Two Different Kinds of Stock Brokers

There are essentially two different kind of stock brokers. First, there are the traditional stock brokers who will give you guidance and help you place trades on the market. These stockbrokers are considered to be full service and dedicate their time to helping you invest. Then there are the discount stock brokers, which are usually online electronic companies that will buy and sell stock for you, but do not offer the services and availability of traditional stock brokers.

Prior to the internet, the only kind of stock broker was the traditional financial district employee who would manage the money of their clients. Calling your stock broker was as easy as picking up the phone and speaking directly to the person who manages your money. A stock broker would personally give you stock quotes and allow you to decide how much of a certain stock to buy or sell.

Full Service Means Full Price

That kind of full service is still offered by many brick and mortar stock brokers, but comes at an added cost over the internet's discount brokers. Discount stock brokers operate over the internet and use computers to defray the cost of hiring professional stock brokers. By utilizing computers, discount stock brokers are able to place trades for as low as $5 per trade. Doing the same with a traditional stock broker could cost as much as $35 to $40 per trade.

The difference between brokers largely depends on the amount of instruction you would like. Online stock brokers offer little to no support in making a decision, and are only there to facilitate your own trades. Discount stock brokers do offer something similar to a full service trade with a stock broker known as a "broker assisted trade," which run up to the commission of a normal offline stock broker.

Cost is the Big Difference

The biggest difference between online and offline stock broker is simply cost. With a discount online stock broker, you'll be able to trade for as little as $5 per trade; offline you'll pay as much as $35 just to make the exact same trade. You'll also have a lot more access to the stock market with a discount broker and be able to get a trade in before you could even make a call to the brokerage firm. For large amounts of money and professional advice, the small $35 fee per trade might be worth it to the individual new to the market or who wants some guidance on where to invest.