Advantages & disadvantages of discount brokers

Online trading is gaining popularity in today’s world. The ease and comfort of trading by yourself at your home is the main advantages of online trading. Be it online trading or offline trading, you need a stock broker who can help to trade in the stock market.

Advantages of discount broker

• You can save a lot of money which otherwise would have to be spent on brokerage. If you are an investor, who trades very frequently, a huge chunk of money will be gone as commission which is a percentage of the value traded in the case of a full-service broker. There will also be additional charges like transaction fees, processing fee, You will also have to pay service tax on this amount. So, higher the transaction value, higher would be all related costs. The discount broker, on the other hand, can offer you a fixed rate for each transaction irrespective of the size of money involved.
• If you are wondering how the stock brokers make a profit after giving their services at such reduced rates, the answer is the volume of transaction. Such stock brokers would have a large customer base of investors who conducts regular large-sized They can afford to reduce the brokerage because of this reason.
• Investing through discount brokers guarantees some level of safety as they are big firms with large customer base and good reputation.
• The online discount broker also offers a free trading platform for their investors. You can trade as you wish and based on your convenience. They provide good service which helps their customers to have smooth buying and selling of stocks.

Disadvantage of discount broker

• The main disadvantage of discount brokers is that they do not offer any investment tips or advice to their customers. Unlike full-service brokers, discount broker only gives basic services to their investors. This will be risky especially if you are new to the stock market and need good guidance.
• The trading platform would be set up free of cost, but there are additional monthly charges for getting access to real-time trading data. You also will have to pay maintenance fees.
• There will also be a restriction because discount brokers cannot invest in all type of securities. This can impact your profits in the long run.

Online trading can be made profitable only if you have the best discount broker. Hence conduct a thorough research and compare different stock brokers before you select one.