Alan Kohler's Eureka Report Guide to Personal Investing by Alan Kohler

Author:Alan Kohler
Language: eng
Format: epub
Publisher: Melbourne University Press
Published: 2011-06-01T16:00:00+00:00

Finding a Broker

Buying and selling shares is easy once you have a broker. The difficulty lies in choosing the right broker for your needs. There are dozens of brokers vying for your business and it is worth taking the time to consider your options carefully. Cost is an obvious point of comparison to begin with, but in the long run the quality of the service offered is likely to have a bigger impact on the ultimate success of your investing.

Before you select a broker, you need to consider three crucial questions:

1. Do you need a broker who can offer advice? Full-service brokers can offer advice about the merits of particular investments or simply act as a sounding board before you place an order to buy or sell shares. Non-advisory brokers, who include most online brokers, offer an execution-only service.

2. What services and products are you interested in? All brokers offer the ability to trade shares, but not all of them offer access to more-complex instruments such as options, futures, warrants and CFDs. Experienced investors and traders might want a wide range of products, trading tools and charts. New or inexperienced investors might value educational tools and ease of use. Customer service, research tools, access to share floats and timely market information ought to interest all investors.

3. How much are you willing to pay? Most brokers charge a flat fee for each buy and sell order or a percentage of the total value of the trade for higher amounts. Some brokers have a tiered fee system to cater to different levels of service and may offer discounts to frequent traders. For example, active traders might want ‘dynamic’ pricing, which updates the price of securities automatically. ‘Live’ pricing means you click a button to get the latest figures and ‘delayed’ means just that. The more frequently you trade, the more important price is likely to be.

Inexperienced investors who choose a broker on price alone may end up paying dearly for the lack of advice. For example, BHP Billiton shares routinely trade within a 50c price range in one day, so someone who is buying or selling 1000 shares stands to lose $500 simply by placing their order at the wrong time of day. A good broker could help you avoid costly mistakes and point you in the direction of opportunities you might otherwise miss.

A good place to start your search is the ASX website (www.asx.com.au). Search under ‘find a broker’ and tick the services you want for a list of brokers in your area.

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