Advantages and disadvantages of a discount broker

If you happen to engage a discount broker, you will get easy and cheap access to online investment options. By doing so, you will be taking right decisions and reaping huge returns. On the other hand, an investor will not be getting the kind of detailed services that he can expect from the full-service broker.

Pros and cons

The chief benefit of engaging with some discount broker is that an investor will be able to bank funds with relation to transactions. As the investors hire some traditional or full-service broker, they have to shell out a considerable sum of wealth by way of commissions towards the broker. These commissions would correspond to the volume of trade or may be in the form of flat free. In case the investor trades often, the hefty commissions taken will tot up rapidly. If you hire services of some discount broker, you are sure to bank considerable sum of wealth and also enhance your returns. Hence in a short as well as long run, this sort of service can help you create wealth and if possible a good portfolio for the long term. However, it depends on a number of other factors also whether the trader rips the benefits as expected or not. 

As is evident that the investor is aware that he is going to dole out an immense commission, the thought can urge to take wrong decisions about investment. For instance, in case an investor starts off the trade, the investor is aware of the fact that the trade has necessarily, first of all, earn for the large commissions prior to returns. Given to such conditions an investor will have to carry on trade for long hours to earn so much as to pay for commission and may consequently land in troubled waters. It can lead to losing money because the investor has to continue trade for many hours more.

The advisory service:

Moreover, one more benefit of engaging with a discount broker in India can be counted as the brokerage house will not force the investor to go for particular investment. In the case of the full-service brokers, the investors are urged to go for particular investment so that they can claim more commission. On the contrary, the discount brokers are aware that they will take fees on volume since the investors will undertake trade very often.

Although, it is a fact that an investor will surely save some money by engaging with the discount broker, yet the investor will not be able to enjoy the services as proffered by the full-service broker. It is common practice with the discount brokers to prompt the investors to research the market themselves and arrive at some decision pertaining to the investment. It is the full-service broker to share a seat with the investor and throw up their ideas relating to investment out of their experience. Then a full-service broker will assist the investor to pick up investments. Hence a full-service broker proves more useful in this industry.