Why Should One Opt for A Low Brokerage Trading Account

Why Should One Opt for A Low Brokerage Trading Account

Brokerage Trading Account

Investing in the stock market is a practice that is followed by a large section of society. With the rise of new services like discount brokers, access to the stock market has opened up. It is no longer the exclusive domain of the wealthy. Any risks taken on the stock market yields the same rate of return (and failure as well). The fact that investing in the stock market does not require knowledge of any tricks and trades and depends on hard work and basic knowledge of the fundamentals are what make it an attractive prospect for investment.

Investments are generally made on options, bonds, individual stocks, mutual funds or exchange-traded funds. When trading, an investor generally opens up a trading account. These are similar to the traditional bank accounts, the difference being that apart from just cash, trading accounts can also hold securities, foreign cash as well as other types of investments. Trading accounts can be opened by individuals or businesses in order to execute transactions involving the sale and purchase of these financial instruments.

Types of Trading Accounts
There are various brokers who tend to charge a fee which the trader is liable to pay in case of the total calculated brokerage falling below a certain amount – the Minimum Brokerage Fee. A certain Indian market regulator, has placed a restriction on the maximum brokerage fee that can be charged as 2.5% of the total traded value. However, there is no minimum percentage set, and as a result, different brokers set their own charges.

Why Choose a Low Brokerage Trading Account
When choosing which stockbroker to invest with, their brokerage fees should be considered. While traditional brokers tend to have very high minimum brokerage charges, discount brokers charge absolutely no minimum brokerage for their services. Minimum brokerage becomes an issue because it causes the breakeven point to move higher, leading to any trading in small quantities becoming infeasible. Apart from this, the tax to be paid also increases since it is charged on actual brokerage paid which increases with payment of minimum brokerage on small transactions.

A low brokerage account charges the lowest possible amount as the brokerage in the given market. Opening up a low brokerage account means being charged only a low flat fee on the transactions made as opposed to having to pay a percentage of the profits made. The main benefits are therefore not having a hefty increase in the margin of the burden to be carried in case of any transactions making a loss.

How to Open a Low Brokerage Trading Account
There are various online brokerage firms that you can open up a low brokerage trading account with. After conducting market research as to whether the firm is trustworthy or not, you can hire the firm. Once this is completed, it is only a matter of filling in the account opening form and attaching the required documents for one’s identity and address proof.

When using the services of a broker for facilitating any stock market trades, it is important to pay attention to whether they offer a Low Brokerage Trading Account.

READ  Home Loan Down Payment Advantages For Women

You May Also Like

Leave a Reply