Products Offered by Different Stock Brokers
An investor’s life is made easier by stock brokers. Investors need an intermediary to trade in the stock market for smooth transactions. And that intermediary who helps you in buying and selling stocks is known as a stock broker. All of the brokers offer a wide range of investment products. They also offer margin trading. Apart from that, they offer trading apps to help with buying and selling transactions. Almost all brokers offer these services. Now, there are two main types of stock brokers, which are full-service brokers and discount brokers.
This article will discuss the difference between a full-service and a discount broker and what products and services they offer.
What is a full-service stock broker?
Full-service brokers help investors invest in a wide range of financial products, such as stocks, IPOs, bonds, mutual funds, and so on. They offer tailored brokerage plans and services per your investment needs and goals. They offer you a personal relationship manager to assist you in your investment journey. They help you with any investment-related query in just a few minutes. You get an instant solution to all your investment problems. Full-service brokers help you by providing multiple investment solutions for all your financial goals.
Many full-service brokers provide you with other services like portfolio management, wealth management, financial planning, etc. For providing these many services, they charge you a commission which is on the higher side as compared to discount brokers. So, they provide you with additional services but at a higher commission fee. Some of the top full-service brokers are ICICI Securities, IIFL, Motilal Oswal Securities, Kotak Securities, etc.
Products and services offered by full-service brokers
Despite the risk, investing in equities is known to provide investors with high long-term returns. As an investor, you get partial ownership in a company by purchasing their shares/stocks and then those shares are traded on a stock exchange. The main advantage of an equity investment is the possibility of increasing the value of the principal invested. This is done through capital gains and dividends.
2. Mutual Funds:
It is a financial vehicle that pools money from different shareholders to generate profits or income. The collected money is invested in various financial instruments like stocks, bonds, money market instruments, etc. As a result, each shareholder receives a proportional share of the fund’s profits or losses. Mutual funds are managed by fund managers, who are experienced in analyzing and managing investments. The fund managers decide where and when to invest.
3. Exchange Traded Funds (ETFs):
It is similar to mutual funds which are traded on a stock exchange. An ETF is an index fund that is listed on an exchange and traded like a stock. They are passively managed which means they track the market index like NIFTY 50, NIFTY Next 50, NIFTY Bank, etc. ETFs, invest in the same stocks as indexes and the same proportion as their index weight. As a result, they can replicate the performance of the underlying index. As the fund manager is not actively involved in managing the portfolio, the fee charged is very low.
4. Futures & Options:
These are the types of derivatives products traded in the stock market. A derivative is a contract whose value is derived from underlying assets such as stocks, commodities, currency, and so on. A future contract is an agreement by a buyer (or seller) to purchase (or sell) a certain quantity of an asset, at a specified price, at a future date. An option contract gives an investor the right (but not the obligation) to buy or sell stock at a specific price. As long as the contract is valid, this transaction can take place at any time.
5. Sovereign Gold Bonds:
SGBs are the perfect alternative to physical gold where you earn capital appreciation as well as yearly interest. They are issued by the Government of India which ensures high safety. The minimum investment required is 1 gm of gold, while the maximum is 4 Kg for individuals. You also earn a 2.5% fixed interest rate on the initial investment amount. The bond has an eight-year term with an option to exit after the fifth year and sixth month.
6. Fixed Deposits:
FDs are the most popular investment option in India which provides guaranteed returns. You can invest a certain amount of money in FDs at which you get a fixed interest rate. FDs are offered by banks and non-banking financial companies (NBFC). Fixed deposits are available for various terms, ranging from 7-14 days to 10 years. A term deposit is another term for a fixed deposit.
7. Currency trading:
Currency trading is the exchange of currencies for profit, using the difference in currency value. From Monday to Friday, the market is open 24 hours a day. Major forex trades are taken by institutional investors like those who work for banks, fund managers, and multinational corporations. It is a massive market, with a traded value exceeding that of equities.
8. Initial Public Offering (IPO):
It is a process where a private company sells its shares to the public for the first time. A private company with a few shareholders goes public by trading its shares. The company’s name is listed on the stock exchange after the IPO. Companies, whether new or established, can choose to go public through an IPO. Companies issue IPOs to pay off debts, raise capital for growth or expansion, etc.
Commodities are products or goods that we use daily, such as metals, food, and energy. They are easily tradable through derivatives contracts. The different types of commodities that can be traded are agriculture, metals, energy and livestock & meat. Commodity trading is a great way to diversify your portfolio as they are not much influenced by the factors influencing the stock markets.
10. Non-Convertible Debentures (NCDs):
Debentures are long-term financial instruments issued by a company with the promise to pay the investor a fixed interest rate. Debentures are mainly classified as convertible or non-convertible (NCD). Non-convertible debentures (NCDs) are debt instruments that cannot be converted into shares or equity. The interest rate on an NCD is determined by the company that issues the NCD. Different credit rating agencies like CRISIL, CARE, FITCH, etc. rate debentures to ensure safety and lower the risk of default by companies.
Additional services offered by Full-service brokers are:
1. Portfolio management services:
PMS is a customized service for investors where investment solutions are provided as per the goals and risk tolerance. Other factors like time horizon, allocation to equity and debt, and risk-to-return balance are considered to grow your wealth. This service is suitable for high net-worth investors.
Many full-service brokers also offer you different types of loans like personal loans, home loans, and education loans at competitive rates. Many smart products are offered with easy documentation, quick disbursal, and fast loan processing. You can apply for a loan based on your capital needs. Clients can also top up their accounts with the broker.
Many brokers provide you with insurance facilities as well. You can apply for life insurance as well as general insurance as per your requirements. Also, you get various plan options to choose from.
4. Financial Planning:
You get a tailor-made financial plan as per your goals by reviewing your cash flows. It is done as per the financial capacity of the investors and market conditions. This service can help you save enough for your future, reduce your debt burden, and also to save the maximum amount on taxes.
3-in-1 demat account: 3-in-1 means you get a savings account, demat account, and trading account integrated. Brokerage firms that are also part of a banking group provide 3 in 1 demat account. This account is highly convenient for trading and quick transfer of funds.
5. Wealth management services:
Wealth management plans are customized to meet the needs of each client. The financial products are combined to help the client achieve their financial goals. This service is mostly for high-net-worth individuals (HNI) and corporate clients. This service is supported by extensive research and an excellent personalized service team.
What is a Discount broker?
Discount brokers are suitable for a ‘do-it-yourself’ type of investor. They do not offer any kind of advisory services. It allows you to transact in stock or other investments at lower brokerage costs. While full-service brokers offer a comprehensive range of services, discount brokers concentrate on the fundamentals. They do not offer you any additional services like research or investment advisory services. They just have basic services like trading software and trading platforms. They do have many physical branches to assist you. So, effective customer service can be an issue. Some of the top discount brokers in India are Zerodha, 5 Paisa, Upstox, and Groww.
Products and services offered by a discount broker:
The primary reason for investing in equities is to grow your wealth. Most discount brokers charge a very low fee/ brokerage if you trade with them. The main motive of discount brokers is that they provide you with the lowest brokerage. Most discount brokers do not charge anything for equity delivery and a flat fee for equity intraday.
2. Mutual funds:
You can now buy direct mutual funds online without any commissions through discount brokers. Mutual funds are the most popular investment product to grow your money in the long term. You should look for a broker who provides you with direct mutual funds with 0% commission and no hidden charges.
3. Commodity trading:
It helps you in portfolio diversification and because commodity prices move in the opposite direction of stock prices, investors engage in commodity trading during market volatility. You also get good leverage for intraday trading. Commodity trading takes place in either derivatives or spot markets.
4. Futures & Options:
Derivatives trading consists of futures and options contracts traded on NSE and BSE. You can trade in different commodities like precious metals (gold, silver), agriculture, energy, etc. Some brokers provide you leverage up to 40 times on commodity trading.
5. Currency trading:
With the growing connections of the global economy, currency exchange rate fluctuations have created enormous opportunities for traders to trade currencies. You need to trade in currency pairs like USD-INR, EUR-INR, etc.
6. Additional features:
Some of the other available features are a Call & trade facility in which you can buy or sell stocks, derivatives, or other investment products over a telephone call. The educational content is in the form of articles and videos, advanced and high-tech tools and software, a refer and earn facility and a margin trading facility for customers.
To choose between a full-service broker and a discount broker, you need to figure this out as per your knowledge, time, and requirements. If you have been investing for a long time and know a lot about investing, you may be better off with a discount broker. Because discount brokers do not provide you with advisory services, they only have trading products, so you have to do your analysis and research before investing.
However, if you don’t have much time to do your research, a full-service broker is the best option for you. They have numerous products and services to assist you in investing. If you need a financial advisor to help you with your investments, a full-service broker is a good option. So, the choice is yours!