How stockbrokers make money?

Trading is done for the purpose of earning profit but it is not easy as it seems. Whatever seems comfortable in investing has a rare chance of making a profit. The profit comes with risk and trading is all about taking risks to earn profit. Additionally, investing comfortably and feeling safe is not the main intention of trading, risks are part of trading and investing that cannot be avoided. A stock market is a place where the investment is bought and sold. The investments can be in the form of shares of a public company, bonds, stock, etc.

There are two main stock exchanges in India where trading takes place namely:

• Bombay Stock Exchange (BSE)

• National Stock Exchange (NSE)

Now the question arises who does the trading? The answer to that is a Stockbroker. A stockbroker is a licensed professional who is trustworthy and the one who executes the trading transaction. Moreover, they facilitate selling or buying of shares on behalf of the third party that is their clients. So first let's know who exactly a stockbroker is and what are types of stockbrokers available.

Who is a Stockbroker?

A stockbroker is a salesperson with well-equipped knowledge and assets about trading in various stocks that are present in the stock market. Additionally, if you are an investor or a trader you must be thinking it's not that hard to buy or sell any stock. If it was the case then stockbrokers would have never existed, the whole process is not that easy as it seems for which you will need a stockbroker.

There are various rules and regulations, many government laws, and knowledge that most investors lack. For these reasons, they will require a stockbroker who can act as a legal agent with high knowledge of trading. Moreover, brokers have a good knowledge of transactions and business with a grasp on debt, accounting, and other finance-related activities. Additionally, these individuals understand the markets and opportunities that can be used for maximizing profits.

Some of the best stockbrokers in India that are trustworthy and efficient are:

• HDFC Securities

• ICICI Direct

• Wisdom capital

• 5paisa, etc

What are the types of Stockbrokers?

There are three main kinds of stockbrokers. They are:

1. Full-service Brokers: Full-service brokers provide various facilities all together with features of investing in insurance, commodity, equity, etc. Moreover, they provide research calls, trading platforms, and trading tips. The office of a full-service broker contains various research and found outs that can help their clients to invest in a better manner. Additionally, they provide alternatives to mobile trading for their high-profile clients. The charges are fairly high as they provide high-end services. Famous full-service brokers in India are Sharekhan, Motilal Oswal, Kotak Securities, etc.

2. Discount Brokers: Discount brokers provide limited services compared to a full-service broker in a less brokerage charge. They provide a decent platform that can facilitate trading with knowledge of the stock exchange. As the fees charged are minimal, even the services are amazing as compared to the fees. Moreover, the clients have easy access to the information and trading with a user-friendly mobile interface. Some of the famous discount brokers are Alice Blue, SASOnline, Zerodha, Upstox, Edelweiss, etc. You can check out the discount broker:Angel Broking Demat Account

3. Angel broking Demat Account

4. Direct-access Brokers: The last category of stockbrokers available is Direct-access brokers or online brokers. They charge the lowest commission and the commissions are per-share based. The prime features of this type of stockbroker are speed and access to various charting tools. Additionally, they also provide routing capabilities and most operations are handled online. The communication of the broker and clients is hassle-free as the whole thing is conducted online.

Full-service brokers and banks are somewhat considered as traditional brokers as they try and interact with the investors. Earlier the broker was obliged to communicate with their clients by meeting them in person for persuading the clients to buy the stock or bonds they have to offer. The old process was not transparent and was also very lengthy. As time passed by due to technological advancement now every client can communicate to their stockbroker via online mode.

How does Broker make money in India?

The money that a stockbroker earns in India is majorly by these means:

• Referral Bonuses: Companies persuades the investors to buy a particular stock. If the stockbroker is able to sell it to them then he receives referral bonuses that motivate them to bring new investors. Every new sign-up is a profit for companies and brokers receives bonuses for the same.

• Broker Fees: When any client takes bits of advice it is very costly ad brokers charges fees for that. Brokers analyses and give information on a stock that can be profitable to the client. This advice can be valuable for the client’s portfolio success for which the broker charges his fees.

• Commissions: The prime source of income for a stockbroker is Commissions. The charge for trading shares that every client has to pay to its broker. If the broker is having a good reputation and is famous they will charge higher commissions for the best services. The commission is charged as a certain percentage of trade per share.

The factors on which Stockbrokers earning highly depends are:

• Number of active clients

• Brokerage Charges

• Trading volume: Higher the trading volume, the broker will receive higher brokerage.

Conclusion

As trading and investing in the stock market become popular day by day, the need for stockbrokers has increased. There is a huge scope if you want to become a stockbroker or to know how to stockbroker earn this article will help you to learn more. Additionally, if you are an investor who is new to trading you should always work with a stockbroker.

Stockbrokers make the process much easier as you just have to make decisions and the rest of the execution is completed by them. In the end, you should choose the best stock broker that suits your requirements and goals of investing. In addition to that choose the stockbroker type carefully and enjoy the benefits you receive.

S. Vishwa is web marketing analyst at Finology Ventures. With 5+ years of web marketing experience, joined a Fintech company to help people to learn and earn more.