Business Article - Finance Brokers
What is a finance broker and what can one do for you? The basic answer is simple: a finance broker is someone who exists to help you make money. By giving you advice on how to invest your money and make a profit, the finance broker takes a lot of the time spent in research out of investment. An experienced finance broker can help you to find investment opportunities that you would never have found on your own, and can give you advice on whether a particular investment is a safe bet or a large risk.
There are many types of brokers, however. The traditional image of a finance broker is what we today call a full service broker: someone with experience in the financial sector who advises you consistently on what to do with your investment dollars to reach your financial goals. A full service brokerage firm will usually have a range of services available for their clients, so that you can divide your savings among a number of vehicles and have a stable overall position that will appreciate in value as a whole over time. During the occasional periods of flux in financial markets, a full service broker will have experience that you can draw upon to know what to do while investors that are going it on their own have no one but themselves and the opinions on the internet to tell them what to do with their money. These are the positives of having a traditional full service finance broker. The negative aspects of full service brokers are that they tend to be more expensive than any of the other brokerage services. There is the question of trust, in that some brokers will suggest that money be moved from investment to investment or that various actions be taken just in order to make a greater profit off of their customers in transaction fees, charged every time that the broker does something with your money. Finally, there is the question of competence, as many of the funds which are suggested by brokers appreciate at rates which are directly comparable to the index funds (investments which mirror the overall growth of either the entire stock market or just a particular sector), or in many cases underperform the index funds over time. To find out whether a finance broker is right for you, be sure to ask what the commission structure is for the broker - what actions by the broker and what products will result in the broker receiving an extra commission. If possible, you may want to go with a payment plan for your broker where you pay a certain percentage each year instead of a commission fee on trades - this can cut down on the amount of churn that an account experiences and make sure that your money is only moved if there is a good reason.
If you choose not to go with a full service finance broker, what kind of other alternatives are there? On the internet, you can find a wide range of discount brokers. Many of these brokers are services which allow you full control at all times over the investments that you make (there may be some limitations on how quickly you can move money). The fees charged for making trades are generally as low as you are likely to find anywhere, especially among the sites that are focused entirely around making your own orders. Some of the big name discount brokers on the World Wide Web such as Waterhouse Securities and Charles Schwab are starting to charge somewhat higher fees for services which include additional account management by financial professionals and various special mutual fund offers. The greatest advantage of going with one of these online services is the amount of direct control that it gives you over your money, and the ease with which you can keep track of all of your account history. There are disadvantages to the online brokers as well, however, with one of the biggest problems being that during times of high traffic or site maintenance the web sites can grind to a near stop, making it very difficult to carry out trades consistently. Another downside is that depending on the World Wide Web finance broker that you choose, they may provide little or no help in determining which investments make the best financial sense. In situations where the market is turbulent you may be left to your own devices to figure out what to do. Even if advice is offered from the broker, you will only be able to get it via email and / or telephone, instead of being able to meet with a broker in real life for a face to face sit down at a branch location. In general, unless you really know what you're doing, you will probably want to avoid using a discount broker, since in most cases you get what you pay for, and if the quality of service varies during a time of high trading it may be very difficult for you to get the help that you require in time to protect yourself from losses.
Finally, you have the option of putting your money directly into mutual funds. A mutual fund is a single investment which represents the combined strength of a number of lesser investments. Essentially you are investing in the average value of a group of stocks. These stocks may be set from the time that you invest to the time that you sell your shares, or the brokers who maintain the mutual fund may change the stocks from time to time according to the rules of the fund to get the best results. Many people hire a traditional full service broker to aid them in selecting a mutual fund or funds, because it takes research to find out which funds are the best over time and which have the most satisfactory terms. Usually there will be a fee upfront when you put your money into the mutual fund, and then there will be regular fees over time. This is added to, when you sign up for the mutual fund through a full service broker, by the broker's transaction fees and the price of the finance broker's advice. A somewhat cheaper option, which requires that you do your own homework, is to buy your mutual funds directly from the company that maintains them, using what has become more and more popular in recent years as a mutual fund supermarket. The mutual fund company will provide a listing of funds and allow you to compare their traits and pick the ones that you find most attractive. The down side to this, of course, is the lack of advice that you have. However, with a little internet research you can get a sense of which funds are the most likely to have the highest returns.
A mutual fund is generally a long term investment, which can be for ten years or more in some cases. After doing your research up front, you sit back and simply take periodic looks at how the mutual fund is progressing. There are hundreds, even thousands, of mutual funds on offer in the mutual fund supermarkets that are now available from trading companies such as Charles Schwab. Many of these funds have little or no up front fee to invest, and these can make just as much money in return than the ones that have significant charges to enter into. Inquire with the big investment houses to get information on some examples of mutual funds that they offer and you can probably get access to their listings of funds in the mutual fund supermarkets online so you can begin doing your research into the process right away and decide which kind of mutual fund would be best for you.
In summary, the three basic choices for brokering your finances are a traditional, full time finance broker, a discount broker on the World Wide Web, or a mutual fund - which you also have the option of entering into through a traditional broker. Whichever kind of broker you select, remember that everything about the process should be geared to make you as much of a return on your investment as possible - as much money as possible. Brokers who charge large fees should be able to earn their money with good advice and a proven track record of investment that puts them above their competitors. If a broker has a history of returns which is merely adequate or somewhat above average, they should not be charging exorbitant transaction fees. Be clear when you enter into an agreement with a broker about the schedule via which you will pay for the broker's services and the extent to which the broker has freedom to make investment decisions. Stay involved during the investment process and check on the rate at which your investments are appreciating regularly to make sure that your money is growing the way that it is supposed to; by staying informed you can ensure that you and your broker will make the best decisions you can.