If you are considering investing in stocks and shares, you’ll need to research stockbrokers. You want to work with a broker who will tailor their services to your needs. A stockbroker is basically a person who buys and sell shares for a living.
It doesn’t matter if you are new to trading, or an expert, dealing in stock shares can be complex. They’re often somewhat difficult to understand. You will want to understand the different types of services offered.
CMC markets provide clear online tools that help a client understand the stocks and shares marketplace, so that sensible investments can be made.
Is Share Dealing the Right Option?
Before you consider whether stock market trading is right for you, consider the following:
– Aside from your mortgage, you should be completely debt free
– Make sure you have a life insurance policy, if you have children
– Check whether or not you have joined your employer’s pension scheme.
– Check whether you are protected through a work income protection policy in case you had to go off work through illness or because of serious injury.
– Make sure you have 4-6 months of savings behind you, in case you were to lose your employment.
If these points are not in place, then you need to use your investments in another way. Share dealing can be a risky business because market prices fluctuate massively and investments can be lost in the blink of an eye. Therefore, you must be prepared to lose some or all of your investment.
Stockbroking Services Offered
There are a wide range of stockbroking services offered and it depends on your knowledge of stocks and shares, your experience in the trading sphere and how much time you have invested in researching the current stock market. Research is fundamental if you are going to see a potential return on your investment.
Execution Services
An execution service has stockbrokers that make trades based on your specific instructions, this means that the broker does not give their professional advice or knowledge – they listen directly to you. Purchases or trades are made on the phone or electronically. This type of service suits those who understand and have already had experience in the stocks and shares market. Investors must understand that using this type of service is risky because their investment is not backed up by professional advice. Essentially, the client will need to have good knowledge in order to make a return on any investment.
Some firms offer execution only services, which means they offer online market advice and research tools to enhance traders’ knowledge of stocks and shares. Most of these brokerage firms also offer funds and are known as “fund supermarkets.”
Discretionary Services
A discretionary service means that the broker can make decisions without consulting you; they can buy or sell shares based on their knowledge of the market at the time. This means you are firmly placing your trust and money in the hands of the broker. If you do this, make sure you use a reputable discretionary service and vet them properly. The broker will make decisions based on originally outlined requirements, but they will be able to respond to fluctuations in the market.
It can be a risky investment for some traders, but if you have good knowledge of the marketplace and choose the correct brokerage firm, then your investment should see a return. If you are using this type of service you will normally need to invest a sizable amount – usually £100,000. Therefore, it is normally small to medium sized businesses that can make a financial commitment of this size.