The benefits and risks associated with a discount broker

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In order to invest in financial markets the choice of discount brokers in India seems to be an ultimate choice. The moment you are going to avail the services of a discount broker you will gain some benefits but at the same time there are some problems as well.  Let us now explore the positives and even risks of availing the services of a discount broker

Benefits

The major benefit when you are going to avail the service of a discount broker is that the commissions are expected to be on the lower side. The moment you regularly purchase stocks or securities you do not intend to pay rather than what you need. The moment you work with a traditional broker there have a higher fee structure that you might have to deal with. This fee is based on the total value of the transaction size. If you are an individual who likes to invest a regular sum of money at periodic intervals of time then you would want to do it in a cheap way as far as possible. In certain cases even 20 % of your investment could end up with a broker.

Apart from this when you avail the services of a discount broker it is more on the safety front. In most cases if a broker can lower down the commissions, what it means is that they are making up in bulk. The better discount brokers are going to be large ones in the market. It would mean that your investment is in much safer hands rather than a small brokerage that is not known

Risks

To a larger extent you might be able to save a lot of money with a discount broker. But all is not a bed of roses as there are some drawbacks as well. In most of the discount brokers they are going to leave all the investment decisions on to you.  They are not bothered about what you are buying or selling as long as you undertake regular transactions. The worst part is that you might not be given a lot of attention as would be the case with a full time service broker. Mostly what they do is that they provide you with a trading platform and some generic information basically a website where you can interpret things. In case if you need help they might not even be there to help you during the times of your need.

When it is the case of a discount brokerage you might forego certain features or services that you might have obtained with a full time broker. In a lot of securities you might not be able to invest with a discount broker as is the case with a full time broker. Most of them end up focussing on the popular investment types.  There is a restriction in terms of options as it is going to have considerable impact on your profits in the long run.

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jyoti

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