Before the internet took over and solved many of people’s burdens, only the richer folks had access to brokers and therefore the market. However, technology speeded up and changed the landscape. Discount brokers are now very much available online—but many people have misconceptions of them.
Here are some of the most common misconceptions of people when it comes to discount brokers.
Discount brokers are NOT fiduciaries
If you have already had the experience of working with an investment adviser, you may have been informed that they are bound by fiduciary duties. That basically tells you that they have to put your best interests first before theirs as they make recommendations.
This means that they also need to consider your risk tolerance, goals, and other financial information. In their most ideal form, fiduciaries should be the ones who got your back more than other professionals.
BUT discount brokers are not fiduciaries. If you have bought 500 shares of a super volatile stock, the discount broker probably won’t give you any advice of the risk that comes with such an investment. In other words, when you’re trading with a discount broker, you should be your own man.
There might not really be a discount
If you have shifted from a broker-dealer to a discount broker, you’re in for a huge discount if you Traders Joint Account very frequently. On the other hand, if you’re among those who only have small amounts of money to invest, the trading commissions can rack up quickly.
If you want to keep your trading commissions low, you have to keep your positions diversified but you shouldn’t have so many stocks that you’re having to buy and sell too often, if you have a low account balance.
There are discount brokers that have user summit as well as branch level educational events and seminars. If you have always craved for trading knowledge and trade options, the broker may have an introduction class that you can attend—for free.
However, such events don’t guarantee that you’ll learn everything you ought to learn. The more you go trading, the more money they earn. Remember that options, bonds, and other products can come with higher commissions. So that means they’d like to see you try some new things.
Trader workshops are good, but be sure to gain as much experience and knowledge first before you commit real money.
Discount brokers are different from each other
There’s no denying that discount brokers come in different sizes and shapes. You can find easily a hundred of different discount brokers that offer different kinds of services. Each of them provides a different level of quality brokering.
If you do not really like meeting in person, there are discount brokers for you. If you’re the type who likes to do some discussions over cups of coffee, there are discount brokers’ offices which you can visit anytime.
Meanwhile, some of the full service brokers are now offering stripped down services that let you make Trading Account Types online. Never assume that all brokers are the same.