The Hindu Business Line : To invest, first catch a good broker

Finding a broker can be one of the easiest things on earth, but finding a good one can be difficult. A good broker is one who will understand your investment goals and help you achieve it. But to ensure success in this process, you need to trust your broker.

As always, trust plays an important role, whenever money is involved. But before getting started, you need to understand and classify your investment style.

Investment style

The first step to be taken in selecting a broker is to classify your style of investing to make an informed decision. Some basic questions one needs to look at are:

Are you an investor or a trader?

If you are a trader, should orders be executed speedily and efficiently?

If you are an investor, how long do you plan to hold on to your investments?

Do you need personal advice on your investment, or are you comfortable doing your own research?

Do you travel a lot? If yes, would you be in a position to monitor your investments?

Are you Net-savvy? If not, are you open to using an online trading account?

Based on the above insights, you can prioritise your needs. That is, if you are a trader, market gossip, fast execution of orders and interaction with other traders would be on your list of priorities and, for that, offline brokers would prove more beneficial.

But if you are an investor, stock research would be of greater importance.

If you have access to the Net during the day, you can even select an online broking platform. The second step would be to find out from your friends and relatives about their brokers and use their recommendations and experiences to arrive at a list of prospective brokers.

After preparing the list, jot down what you would expect from your future broker. You can answer these questions to begin with:

Do you need a typical offline or an online broking account?

In case of an online account, does it offer a click-n-brick model? Beginners might find online firms offering personalised advices more useful.

Do you plan to invest in MFs and IPOs also? If yes, find out if the broker has a facility to buy/sell MFs of fund houses that interest you.

Most of the brokers charge an account-opening fee. Compare these charges and based on your needs, eliminate a few brokers from the list.

Get details on brokerages/commission that are charged per transaction. Before you eliminate more brokers from your list, understand that cheap is not always the best. Some firms charge higher for their value-added services. Give appropriate weight to the services vis-à-vis the brokerage charged based on your personal requirements.

Zero-in

Finally, you need to contact the brokers on your list and meet their sales personnel. Clarify all doubts on various products and brokerages and do not hesitate to ask questions.

The answers to these questions would help you get a clearer picture about the broker; at times, the absence of any convincing reply would help in your elimination process.

The third and the last step is to zero-in on a broker who fulfils most of your requirements. For instance, if you are a trader who prefers a client-dealer interaction, an offline broker with a competitive fee would be more suitable.

But, if you are a trader who likes to be on his own, an online account with a good trading software can be considered. Beginners can choose their account by placing more priority on customer service and research inputs that the prospective broker usually provides.

Irrespective of all these criteria, always remember to go with a broker who is well established in the industry and carries a good track record.

Even though it takes a lot of effort from your side to select a broker, remember it is your money and you will always be better off safe than sorry.

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