How Much Service Do You Need from Your Broker?

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How Much Service Do You Need from Your Broker?

Is a full-service or discount broker right for you? The answer depends on how much of what a full-service broker does that you can do for yourself.

Things To Know

  • The answer depends on how much help you need.
  • If your investment plans are uncomplicated, you may be able to do without the advice and research of a broker.

You may not need one

If your investment plans are uncomplicated, you may be able to do without the advice and research of a broker. For instance, if you plan to buy shares in a moderate mutual fund and hold them for 10 years, you may not need a lot of research and monitoring. Similarly, if the idea of managing your own investment strategy interests you, and you are willing to put in the time and effort to learn about the investments themselves and keep track of market conditions, steering your own boat with the help of a discount broker will save you money on commissions or fees.

Or you may

However, if you do not have the time, knowledge, or inclination to go it alone, using the services of a full-service broker can make sense. If you do not like poring over balance sheets and quotation tables, you will need the help of a broker to make careful investments. And the average individual investor should not consider complicated options and futures strategies or margin trading without the advice of a professional.

But remember this

A few provisos are in order, however. Brokers typically have more financial education and experience than you do, but they are not clairvoyant; working with a full-service broker will not automatically make you more money. While a broker may be of enormous help, you are the one who is ultimately responsible for your money. Be sure to pick a broker with a sound reputation, one who is sensitive to your needs and dedicated to pursuing your investment strategy. Ask questions if there is anything you do not understand.