What is an Equity Broker?
Those who wish to buy or sell shares of stock in publicly traded companies do so by engaging a stockbroker. The broker receives a commission and in some cases a monthly account management fee.
When most people use the term “stockbroker,” they more than likely mean a stockbroker. However, there are some differences between the two. Stock trading, which includes hedge funds and day trading, is more properly considered a subset of traditional stock market trading. Stock brokers typically work with individuals who want to invest more aggressively or who may have complex trading strategies they want to implement. Minimum investments are usually high and fees can be too.
A stockbroker usually does more in-depth market research, and equity firms often have extensive, proprietary trading systems. Many firms dedicated to stock trading were established as hedge funds and are part of large investment banks.
Hedge funds are quite different from the traditional approach to investing in the stock market or mutual funds, which is to buy stocks and hold them for a significant period of time. Hedge funds are usually very active and often the fund manager takes huge risks that can pay off in the form of huge profits or losses. In addition to investing in stocks and bonds, hedge funds may also speculate in foreign currency or potentially any other investment that is included in the plan or strategy.
You can also find stock brokers at firms that specialize in day trading. These private equity firms make their money by allowing select traders access to funding from the firm. Some will require traders to use the investment strategy developed by the firm, while others let the investor choose the strategy as long as their choice is profitable.
Capital brokers can be found in many different types of investment firms. An investor’s experience and comfort level with risk should determine the type of stock broker he chooses.
Full-service brokerage firms typically have stock brokers available to assist those investors who want to take a more aggressive approach to investing. These firms offer more “hands-on” services to the client by conducting market research, monitoring accounts and providing advice. Naturally, their fees and commissions will be among the highest.
Many online stock brokers offer investors the ability to choose their own investments and strategies. Creating an account with this type of broker is usually quick and easy. You can enter your trade orders 24 hours a day, 7 days a week, although they cannot be executed until the market opens.
Due to the fact that stockbrokers typically do many more trades than those who buy and sell for long-term investors, fees can add up quickly. It is not unusual for investors to find that a quarter to a third of their profits have gone to the stockbroker or his firm. Investors should perform due diligence on all investment opportunities, but with the fast-paced nature of stock trading, it’s even more important to do so before making the investment.