Equity and Commodity market plays a vital role in Indian economics. A large section of Indian is engaged in trading. Therefore, brokers are in high demand always. The main objective of trading is to get maximize profit. Hence, one should be careful about choosing a broker. There are certain criteria for choosing a broker, such as services and feature offered, research and investment tools, minimum opening balance requirement, cost of commission and fees. In India, brokers are registered under SEBI. Generally, you will find two categories of brokers, such as full-service broker and discount broker. The article will cover low cost brokerage firm and its pros and cons but before proceeding it should be clear to you that what is the difference between full-service and discount broker.
Full-Service Brokerage Firm vs Low Cost Brokerage Firm
There are some key differences between full-service and low-cost broker.
Brokerage- Their charge is based on each executed trade in percentage while low-cost broker offers a flat fee on each trade executed.
Brokerage rate- Generally between 0.3% to 0.5% and in low-cost rates is Rs.20 per trade.
Investors quality- Investors those who want advisory for their investment should go for full-time and those who can research on their own or have a financial advisor, can go for a low-cost broker.
Primary service- Along with trading platform full-time broker provides advisory for investment but in the low-cost brokerage firm, the advisory is not available here.
Research and analytical department- Full-time brokers have their own research and analytical department while in low-cost brokerage, there is no such facility.
Customer services- Face to face customer services are available while low-cost brokerage only has online facilities.
Now, let’s focus on the low-brokerage firm.
Pros and Cons of using Low Cost Brokerage Firm
- Lower fees or brokerage charges for trading.
- Investors have more control and flexibility in their trading and demat accounts.
- Brokerage bias section is nil here.
- Traders have enough access to the online tools.
- Monitoring opportunity is available.
- No advisor available in here.
- As it is only online based, traders sometimes face problems.
- They don’t have their own research team.
This is a brief overview regarding low brokerage firm. It up to you whether you choose low-brokerage firms or not.