The benefits and risk of a discount broker

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Making an investment in financial market requires the use of a discount broker. The moment you are going to use a discount broker you are going to avail some benefits but there are some loopholes as well. Let us clearly outline the benefits along with risks of discount brokers India.

Table of Contents

The benefits

The main benefit of this type of benefit with this type of broker is the low rates of commission you are going to pay. The moment you are going to be dealing with stock or securities, you do not want to pay more than what you would like. The moment you work with a  traditional broker you would have to avail a large rate of commission seeping on to your profits. This fee is modelled on a total percentage of your total transaction cost. Trust me the large commissions are going to eat into the profits that you are going to make in the market. For example if you an investor who would like to invest regular sums of money at set intervals then the target would be do this in a cheap manner as far as possible. For example, you might be planning a dollar investment strategy and plan to invest around $ 100 every month, then to the broker you might end up paying around $ 20 or more. What it implies is that 20 % of your investment is going over to the broker.

The other positive feedback about a discount broker would be the safety aspect. If a broker is able to offer you low commissions then the chances are they are doing things in bulk. The top quality discount brokers are going to be top notch ones. This would mean that your investment is going to be a lot safer in case if you are planning to go with a low cost one.

Risks

Though you could end up saving money with a discount broker, there are some loopholes as well.  In case of a discount broker you are in charge of your own decisions and there is no one going to guide you.  They are not going to ask you to buy or sell stocks till the point you are buying or selling stocks. If you are a newbie or someone who needs help then discount broker would not suffice. You might need to avail the services of a full time broker in such cases. There are going to provide you with a platform to transact and some general know how on how to comply with guidelines as far as the transactions evolve. In case if you are going to need any help.

In case of discount broker there is also a risk to compromise on some of the features than what you can expect from a traditional broker.  You would not be able to invest in various types of securities when you are with a discount broker. Most times the focus is on the popular type of investments.

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