Although it’s now easier to invest than ever before, a lot of potential investors are turned off by a lack of knowledge in some key areas. This week, we demystify the stock broker.
So you’ve put some extra money aside, researched a few companies, and decided that you’re finally ready to invest. But then you realize that you need a stockbroker.
Who are these brokers exactly? What do they do? And why do you need one in order to make your first investment?
Let’s be honest—the first thing most people think of when they hear of ‘stockbroker’ is Leonardo DiCaprio in a pinstripe suit and a dodgy shirt.
Hollywood is certainly guilty of giving stock brokers a bad name—groups of morally unscrupulous men that are incredibly loud, pushy, and trapped in some sort of ’80s time-warp.
In reality, however, modern stockbrokers are nothing more than the link between an investor and the stock market. In order to invest, you will need to have a brokerage account with a licensed stockbroker who will buy and sell stocks on your behalf.
When you’re sick, you go to a doctor who recommends a course of antibiotics. But it’s the pharmacist that completes the order. This is essentially the same function that modern stockbrokers fulfill.
Why do we need stockbrokers?
One of the main reasons you need a stockbroker to start investing is because they are licensed and accredited professionals. In the US, all stock brokers must have passed their Series 7 exams. These are qualifications specific to stockbroking and an absolute necessity for anyone wishing to act as a broker.
What this essentially means is that brokers are necessary because they’re regulated and they know what they’re doing. They’ve done the exams, they’ve worked the markets, and they can make sure that all investments are processed in the correct and legal way.
With the democratization of the stock market, more and more people are starting to consider brokers as unnecessary middlemen. They might have a point!
But it’s important to remember having people working in the market that are trained and qualified makes them fully accountable for their actions. This means there is a safeguard towards ensuring that everything is done legally. And while they may not be seen as a necessity anymore, their function has also fundamentally changed which means the investor has more freedom.
Most brokerages charge fees and commissions for the work they do. But these fees are now only a fraction of what they were in the past, thanks to the internet.
The internet has made a lot of things easier, not least buying stocks. Brokers will now charge a tiny fraction of traditional fees (if any) and often require little or no minimum deposits from investors.
This is a big departure from traditional brokerage, where stockbrokers charged significant percentages of your funds and required massive minimum deposits. Such heavy tariffs meant that investing was often beyond the realm of possibility for average Americans and much more of a financial risk for those who could take part.
But one of the downsides of today’s cheapened brokerage services is the decline in the service-based aspect of investing. In addition to processing investments, stockbrokers would have traditionally acted as advisor. This meant that investors were usually given some advice and guidance about the investments they made. Some big brokerages still offer this service, but it is far more expensive than the ‘do-it-yourself investing’ that has become the norm.
With the rise of discount brokers, most investments are simply executed by brokers without any guidance being offered to investors. But that’s where Rubicoin comes in!
So How Do I Get A Broker?
Rubicoin has partnered up with DriveWealth brokerage to offer the complete investor package in one simple app.
You can browse the Invest app for great guidance on some of the best investment opportunities around and then invest in the same companies—all from the same app.
What’s even better is that all information and documents necessary for your brokerage account are uploaded through the Rubicoin Invest app. This means that the entire process can be completed with just one download.
If you haven’t yet set up a brokerage account, now is the time to start. It only takes a couple of minutes to set-up and means you’ll be able to start building your investment portfolio almost immediately.