The idea of investing money never bothered you until you realized not spending is a rookie mistake. Storing excess cash in a bank account seems like the safest option, but it’s the least lucrative. And, with interest rates set to rise, it could end up costing you money in the long run. The only problem is that you are a novice and schoolboy errors look set to continue well into your investment career. One slip up and it’s over, which is why a broker is a savvy move.
However, an even savvier one is to research the men and women with whom you will entrust your money. This is what you need to know.
A License Is Legal
Unlike some areas of the financial industry, brokers are quite well regulated. As a result, it is illegal for anyone to operate under the umbrella without a licence. Who is going to try their luck, you ask? The answer is a lot of people who plan on hustling the system and their “clients.” Sadly, naïve investors will accept a person’s word as gospel and they end up in a vulnerable position, but you can’t be as trusting. Regardless of how they appear, always ask if they are fully licensed to be a broker and ask for proof. This is especially important if a person approaches you out of the blue and offers their services.
Fully Serviced Vs Discount
There are two main types of brokers, and the names are in the heading above. It is your responsibility to decide which one is best, and you need to understand the pros and cons to do that. For example, a discount broker is a much cheaper and more flexible option. All they do is provide the tools and let you handle the rest, such as buying and selling. Click here to check out what certain discount brokers have to offer their clients. Fully serviced middlemen and women, on the other hand, handle everything on your behalf. From providing investment opportunities to picking up the phone in the middle of the night, they do it all. Of course, their fee is bigger as a result.
Fees, Fees And More Fees
Obviously, a person or a firm that is going to help you find a way to increase your wealth won’t do it for free. In fact, the amount a broker can charge is pretty eye-watering to an amateur investor. No one is saying they don’t deserve a cut, but there are fees which are common yet rankle. Safekeeping costs are a prime example as they charge money for keeping physical stock on their premises. It isn’t like it costs them anything to house your investments, but they will charge you regardless. You can read more about it here. The best way to avoid this expense is to take responsibility for the stock certificates and negate the safekeeping fee altogether. Please check out any charges and ask for more information if you are unsure. Sometimes, firms rely on novices not understanding to make an extra buck.
Brokers are essential, but that doesn’t mean you shouldn’t do your research.