Understanding Stock Brokers

Written by Charlotte Wood (last updated February 21, 2009)

Once you feel you have a firm grip on what exactly the stock market is, you'll then face the question: what is a stock broker? You hear about stock brokers everywhere, whether that be in the movies, on the news, or in the elevator up to your cubicle office—it seems like everyone who's a serious investor has a stock broker, so what exactly is one and what do they do?

A stock broker is, in the simplest terms, a middle man for investors. Your stock broker takes your money and invests it where he advises, where you tell him, or both. He (or she) handles the official transactions and should advise you when to buy or sell. One of the great things about stock brokers is that they take much of the stress of investing off of you. You don't have to deal with those transactions or their complexities, but conversely you don't necessarily have as much control over your money. Of course, your money is still yours, but because you're not the one dealing directly with it, it's harder to ensure everything's okay.

There are three different types of stock brokers: execution only, advisory dealing, and discretionary dealing. Execution-only brokers will only do what the investor wants. Advisory-dealing brokers can advise the investor on when to buy and sell and what stocks to invest in. Discretionary dealing is even more loose in that the broker has the freedom to make investing decisions for the investor (this one takes a vast amount of trust). These options do give you more control over your money and allow you to delegate more or less control to your broker.

Stock brokers usually work by charging a flat fee and a commission percentage to the investor. Depending on how successful and many times the broker will adjust their fees to how well the market is faring. If you want to invest wisely, then you should probably hire a stock broker just because it's their job to monitor the stock market and if you hire a good one, you'll benefit. Do your homework when checking out brokers and until you can really trust them, guard your money carefully.

Author Bio

Charlotte Wood

MORE FROM CHARLOTTE

Cleaning Up Your Yard

Cleaning up your yard may be a daunting and overwhelming task, but really, you just need to know the right way to go ...

Discover More

Hiding Your Freckles

So many people have freckles, but you may not like yours. There are ways you can mitigate the effect of your freckles, ...

Discover More

Understanding Consumer Debt

Consumer debt is a fast growing problem in America and can come on without realizing it if you're not looking out for it. ...

Discover More
More Money Tips

Investing in the Stock Market

Investing in the stock market can seem overwhelming and scary, a lot like a really small fish swimming in a really small ...

Discover More

What is the Dow Jones Index?

Understanding the Dow Jones Index is critical to understanding the stock market as a whole and as an investor, knowing ...

Discover More

Stock Market for Beginners

If you have never worked with it before, the stock market isn't exactly the best of places for beginners. That is, unless ...

Discover More
Comments

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] (all 7 characters, in the sequence shown) in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 6Mpixels. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 2 + 8?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)