A stockbroker plays an important role in helping people buy and sell shares in the stock market. It has come a long way since its beginnings back in the day. In India, stock trading is said to have begun under a banyan tree in Mumbai during the 1850s. It happened when a small group of people gathered to trade shares with each other.
But today, things are different as now we have a highly advanced system with millions of investors trading online every day. In this blog, you will understand what is a stockbroker, what stockbrokers do, the types of stockbrokers, how they earn profits, and how to become a stockbroker.
Who are Stockbrokers?
Stockbrokers, in simple words, are middlemen who help people buy and sell shares in the stock market. They act as a bridge between stock exchange and the investors. Without stockbrokers, it would be hard for individual investors to trade in the stock market. Though their main job is to help people buy and sell shares, they also provide advice, research, and other services to guide investors.
Functions of a Stockbroker
Here are the important tasks of a stockbroker:
- Placing Orders for Clients: They help investors buy or sell shares quickly and easily.
- Providing Advice: Some brokers give suggestions on which shares to buy, sell, or hold based on market analysis.
- Managing Portfolios: They help investors manage their investment portfolios.
- Offering Research Reports: Brokers often share detailed research and analysis to help investors make the right investment decisions.
- Allowing Margin Trading: Some brokers also let investors borrow money to buy shares, which is called margin trading.
Types of Stockbrokers
Depending on the services offered, there are various types of stockbrokers. Here we list down the most significant ones:
| Types of Stockbroker | Description | Services | Cost |
| Direct Access Brokers | These brokers give experienced traders direct access to the stock market. | Fast trade execution, minimal advice or extra services. | Low trading fees |
| Full-Service Brokers | Offer a wide range of services including trading, advice, research, and portfolio management. | Advice, research, tax planning, and more. | High fees and commissions |
| Discount Brokers | They focus on executing trades at a lower cost with fewer additional services. | Basic trading platform, few or no research and advisory services. | Very low fees |
How Do Stockbrokers Earn Profits?
Now that you know what is a broker in the stock market and the types of stockbrokers, let’s understand how these stockbrokers earn money. Well, there are several ways stockbrokers earn, however, they mostly earn by charging fees for the services they offer. Regardless, here is the flowchart showing how they make profits:
Stockbroker Revenue Model:
- Trading Fees: They charge a small fee every time you buy or sell shares.
- Account Fees: Some brokers charge for maintaining your account.
- Margin Interest: Brokers earn interest when investors borrow money to trade.
- Research and Advisory Fees: Full-service brokers may charge for premium advice or detailed research reports.
- Spread: Brokers sometimes make money from the small difference between the buying and selling prices of shares.
Also Learn: Different Types of Investments: Stocks, Bonds, Mutual Funds, ETFs, Real Estate, and Cryptocurrency
What Kind of Services Do Stockbrokers Provide?
Here are the major services often offered by stockbrokers:
- They help you buy or sell shares in the stock market.
- Help you decide which shares to buy, sell, or hold.
- StockBrokers Provide portfolio management services.
- Provide research reports with market analysis and stock recommendations.
- Help you in margin trading.
- Provide easy-to-use online platforms for trading shares from your phone or computer.
How to Become a Stockbroker?
In order to become a stockbroker, you should get the right qualifications, licences, and registrations. Here’s how you can do it:
- Getting a bachelor's degree in finance, business, or a related field.
- In India, stockbrokers must be registered with the Securities and Exchange Board of India (SEBI). They should also get an NISM Certification as this certification is required to practice as a stockbroker.
- To trade stocks, brokers must become members of stock exchanges like the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE).
- Working with a brokerage firm or gaining practical experience to learn the skills is also needed.
Dos and Don'ts for Stockbrokers
Stockbrokers must follow certain rules to make sure they act in the best interest of their clients. Here are some important dos and don'ts:
Dos:
- Give Honest Advice: Brokers should always provide transparent and unbiased advice.
- Execute Orders on Time: They must place buy and sell orders quickly and efficiently.
- Protect Client Information: Stockbrokers should keep client data confidential.
- Follow Regulations: Brokers must follow the rules set by SEBI and other regulatory bodies.
Don’ts:
- Avoid Conflicts of Interest: Brokers should not recommend trades just to earn commissions.
- Don’t Overtrade: Excessive trading to generate more fees is not ethical.
- No Insider Trading: Brokers must never trade based on private, non-public information, as it is illegal.
Conclusion
Stockbrokers play a crucial role in helping people buy and sell shares in the stock market. They not only act as the middlemen in the trading of shares but also help you understand how the stock market works. If you are looking for a great brokerage platform that is reliable and affordable, then Tradejini stands out with its services.
Tradejini provides high-quality services at low costs, and this makes the platform ideal for beginners as well as experienced traders. With Tradejini, you can enjoy direct access to the stock market, execute trades quickly, and manage your portfolio with ease.
If that’s what you are looking for, download the Tradejini CubePlus App right away!
Fast and convenient trading is here for you. Grow with Tradejini and grow your wealth!
Also Read: A Beginner's Guide to Selecting Stocks for Swing Trading
