Why are stock brokers important? Can I invest without one? Everything you need to know!

If you ever thought of investing in the stock market, you would have to do it through the stock exchange. The two most important exchanges in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). However, an ordinary person cannot just buy stock directly from the exchanges and needs a middleman to execute the trade. That's where the stockbrokers play a significant role in handling such transactions.

The role of a stock broker is to execute orders on behalf of their clients. A stock broker can also be known as a registered representative or financial advisor.

Most stock brokers work for brokerage firms and handle transactions daily for many individuals or institutions.

Types of Brokers

Depending on the type of clients they cater for, stock brokers are classified into two categories:

Institutional Broker: Institutional Brokers have large companies and institutions as their clients. They trade securities on their behalf. They provide financial services like investment banking, securities services such as IPO or secondary offerings, advisory services, and brokerage services to the institutions.

Personal Broker: Personal Brokers provide services such as investment banking, advisory services and brokerage services to small businesses and individuals interested in trading.

Services that Stock brokers offer

Apart from just buying and selling stocks, stock brokers also offer a range of services such as:

Advisory Services: Stock brokers possess expertise in the stock market, performance of stocks and market research. They have full access to the database and research data of brokerage firms they are associated with. Thus, they provide excellent investment information and advice to their clients.

Limited Banking Services: Stock brokers have the authority to provide limited banking services such as interest-bearing accounts, electronic deposits and withdrawals. The clients can use such services from stock brokers by paying them a brokerage fee.

Alternative Investments: Apart from stocks, stock brokers also deal in other securities such as mutual funds, bonds, exchange-traded funds (EFTs), derivatives, and commodity trading. They provide investment-related advice for all these products to their clients.

Conclusion

Stock brokers are a crucial key in the investment scenario of a country. They do more than buy and sell stocks for their clients by offering investment advice to their clients.

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