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Understanding the Role of Broker in Investment

In investment activities, there is a party that plays an important role in making investment activities run smoothly. Without its presence, the investors will not be successful in carrying out investment activities. This party is known as a broker. In the digital era, brokers do not only provide services with conventional methods, but also they provide the service with online methods. Do you know the meaning of this term? This article will provide readers with an understanding of broker that plays an important role in successful investment activity.

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The Definition of Broker

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A broker is an intermediary party for the investors who want to make investment transactions like buying or selling a company’s stock. In other words, a broker can be defined as a party that gets the authority to conduct transactions to buy and sell stock and other investments. 

A broker must have a certification of Certified Financial Analyst (CFA) as an added value. Usually, stockbrokers work in brokerage companies that have been directly connected with the stock exchange parties. However, In Indonesia brokers are supervised by an official institution established by the government called the Commodity Futures Trading Regulatory Agency or BAPPEBTI. This institution conducts supervision so that the financial instrument trading can run under existing provisions and laws.

Also read Trading: Benefit and Types that You Should Know!

The Responsibilities of Broker

There are various responsibilities of broker in conducting financial instrument transactions. Broker play an important role to be an intermediary party between investors and the capital market. As an intermediary party, they must carry out all requests from investors in the transactions of the financial instruments. The broker also helps investors analyze the latest capital market conditions and provides information and recommendations on the results of the analysis to investors.

The Working System of Broker

Like any other job, a broker certainly has a working system. Their working system begins with receiving investors’ requests to conduct transactions of buy or sell financial instruments. Later, the broker will process the request from the investor. 

In this request, the investors will determine the price and the amount of transaction volume. In the end, the broker will get benefits from their company, such as salary and commissions. 

The Types of Broker

The types of brokers can be classified into two categories, based on the services provided by the brokerage’s company and based on their client.

1. Based on the services provided by the brokerage’s company

Deep Discount Brokers

This type provides services to carry out investors’ requests to buy or sell financial instruments. Also, they must maintain the investors’ accounts.

Full-Service Brokers

This type is suitable for first-time investors because they will provide full services such as providing information, providing the result of an analysis report, to conducting transaction requests from investors to buy or sell financial instruments. Investors must provide a large amount of commission for them because this is a full-service type.

Discount Brokers

This type is unable to provide full service as well as the other type. Investors who choose this type already have a basic knowledge of the capital market and can read data from the capital market.

In this type, they will provide some suggestions and strategies for investors in conducting investment activities. The broker will also provide services in determining the decision to buy or sell stock or the other financial instruments.

Online Brokers

The digital era provides innovations for the broker in giving service to the investors. This can be seen from the presence of online brokers. Through this type, investors do not need to come to the brokerage company. First-time investors currently favor online brokers. In addition, first-timer investors can start to make stock investments at an affordable initial cost.

2. Based on the client

Institutional Brokers

The institutional brokers provide stock transaction services such as buying or selling on the capital market for large institutions. In this case, the examples of large institutions such as mutual fund companies or banks.

Retail Brokers

The retail brokers provide stock or financial instrument transaction services for individual investors. Later, the broker will get several commissions from investors.

Tips for Choosing the Right Broker

In choosing the right broker, investors should pay attention to several important things. The right one will certainly facilitate the investors in making transactions to buy or sell stock or other financial instruments. Investors should choose a them that already has legality and is officially listed on the Stock Exchange. Furthermore, investors can avoid fraudulent investment transaction activities.

In addition, investors must choose a competent broker. In this case, they can analyze capital market conditions and in-depth calculate the number of supporting variables. Also, make sure that they have a wide-large knowledge of the investment transactions.

No less important, investors must also choose a reputable broker. With a good reputation, they can make all transaction requests from investors of investment transactions properly. 

Also read: What is Deposit: Differences, Types, Advantages, and Disadvantages

Leading Brokerage Company in Singapore

There are various best brokerage companies in Singapore. As an investor, you can choose the suitable one. Here is the list of leading brokerage companies in Singapore:

  1. CGS-CIMB iTrade
  2. MooMoo
  3. Tiger Brokers
  4. Interactive Brokers 
  5. Saxo Market
  6. FSMONE

Conclusion

The presence of a broker will facilitate investors in making investment transactions to buy or sell shares or other financial instruments. Various types of brokers can be an option for investors in conducting investment transactions. However, make sure that you can carefully choose the right broker and have legality as an investor. So, the investors can avoid investment fraud activities.

broker

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