Top 10 differences between online broker vs traditional broker India
Any kind of transactions in the stock market and the stock exchange requires the intervention of the stock broker who works just like the agent between market participants and the stock market. The stock brokers are the registered members of the stock exchanges which are regulated by SEBI (Securities and Exchange Board of India). Now, the retail broking business model has been classified in 2 main categories i.e. full services stock brokers and discount stock brokers. Before choosing any kind of stock broker, the traders as well as investors need to first properly understand both the options by simply comparing their features and services, minimum opening balance clause, charges, etc.
Top 10 differences between online broker vs traditional broker India would tell you a lot about both the brokers.
Understanding the stock broker
A stock broker is any person who is the registered member of stock exchange and is given the license of participating in the stock market.
The stock brokers may directly buy or sell the shares in the stock market and exchange on behalf of the investors and charge a fee for these types of services.
There’re 2 main types of share brokers in the country:
1. Full-service brokers or traditional Broker
2. Discount brokers or budget brokers
Full Services Brokers or the Traditional Brokers
They are the traditional stock brokers who offer research, trading as well as advisory facilities for stocks, currency as well as stocks.
These kinds of stock brokers charge a commission on each trade that their investor client executes as percentage of every executed trade. They even facilitate investment in Mutual Funds, Forex, IPOs, Bonds, Insurance and FDs.
Some of the examples of the full time service brokers are Kotak Securities, ICICIDirect, Sharekhan, HDFC Securities, Motilal Oswal, etc.
Discount brokers or budget brokers
Discount stock brokers only offer trading facilities for the clients. They don’t provide suits and advisory for DIY kind of clients. They provide a low brokerage, decent platform and high speed for trading in commodities, stocks as well as currency derivatives.
Some of the examples of discount stock brokers are ProStocks, Zerodha, Achievers, Trade Smart Online, SAS Online, etc.
Understanding a brokerage account
A stock brokerage account is the investment account. Once you deposit the money into the brokerage account you may use the money for buying the investments such as bonds, stocks as well as mutual funds.
Is a brokerage account right for you?
Yes, a stock brokerage account is a good option for you if:
· You wish to buy as well as manage your investment. For doing this, you will require a stock brokerage account.
· You wish to invest some money for your retirement and you are contributing sufficient amount for earning a good amount. In such a case, you want to get a particular type of stock brokerage account known as traditional IRA or Roth. They have a number of significant tax related benefits.
Some other accounts could even be better if:
You would have someone else for doing the day to day task of managing your account for retirement or any other type of investment. If you think this is a good option for you, then you may consider opening a stock brokerage account at Robo advisory, considered to be a low cost alternate to the human investment manager. The Robo advisor chooses as well as manages the investment for you, on the basis of your goals.
You would be able to save a good amount for your goals in case you wish to accomplish in the coming few years. With the short span of time, absolutely clear stock market, you may choose to open an online savings account or any other short terms investment.
Below are the Top 10 differences between online broker vs traditional broker India
|Full Service Stock Broker||Discount Stock Broker|
|Brokerage||They charge a brokerage fee in terms of percentage of every executed trade||They also offer flat brokerage fee on every executed trade|
|Brokerage rates||The stock brokerage rates anything between 0.3% to 0.5%||They charge Rs. 20 for each trade|
|Primary Service||They offer platforms of trading along with advice for investment||They just offer trading platforms and do not offer any advice for investments|
|Suitable for||They suit those investors and traders who wish to get advice for their investments||They are suitable for those investors and traders who conduct research by themselves or they have a financial advisor|
|Research Department||They have a dedicated research department for offering advice to the investors||They do not have any dedicated department for offering advice to the investors|
|Network||They have a number of branches across India in different cities||They don’t have many branches|
|Customer service||They offer face to face
Face to face customer service available.
|They only offer online services to their customers|
|Other Facilities||Apart from stocks, currencies and commodities, other facilities include mutual funds, Forex, FDs, IPOs, Insurance and bonds||Just stocks, commodities and current trades available|
|Add on services||Research report, funding, recommendations, extended margins, etc.||They mainly focus on trading|
|3-in-1 Account (Saving+Demat+Trading)||Available||Not available|
|Examples/ Top Brokers||HDFC Securities, ICICI Direct, Sharekhan, Kotak Mahindra Securities, Axis Direct, Motilal Oswal, Angel broking, Aditya Birla money Edelweiss, etc.||Prostox, Zerodha, Trade Smart Online, RKSV, SAS Online, Tradejini, etc.|
So these are the Top 10 differences between online broker vs traditional broker India.
What type of stock broker should you select
The answer for this question mainly depends on your experience, knowledge, time as well as preferences. If you wish to get stock advisory for your money, then you need to select a full service stock broker.
If you wish to conduct a research by yourself or if you wish to hire a financial services advisor, then you need to select a discount stock broker.
So these are the main differences that help us understand the importance of full service stock broker and discount stock broker.