What is a Discount Broker in the Share Market?
- 7 min read
A discount broker offers investment services at an affordable or reduced cost to investors. If you are an investor who is more cost-sensitive, these types of brokers are suitable for your investment needs.
Such brokers rely on technologies to provide you with a seamless investment experience. However, unlike full-service or traditional brokers, they do not provide personalised investment services, advice, research reports, etc.
Such characteristics make these types of brokers ideal for investors who are already familiar with the share market. Read this blog to learn about their features, benefits and more.
Understanding the Meaning of Discount Broker
A discount broker offers you investment services at a much lower cost compared to traditional brokers and just helps in executing trades for you. They do not offer you personalised services like advisory, tax planning, personal consultation, research, etc.
Thus, discount brokers can provide you with investment services at a lower cost as they do not spend money on such services. Due to a low-cost structure, such brokers are now quite popular in the market, especially among experienced or seasoned investors.
What are the Key Features of a Discount Broker?
Now that you have an idea about what is discount broker, take a look at the following features:
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Low Fee Structure
As the name suggests, the foremost feature of a discount broker is its low fee structure compared to that of full-service brokers. Few brokers might charge a flat brokerage or simply keep the charges low. This makes investments affordable for investors with limited capital. Investors can capitalise on market opportunities while spending less on brokerage fees.
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Easy Account Opening Process
A discount broker in India has the feature of opening a Demat account in simple steps. Most of them require very little paperwork. If you produce proper documents, they set you up an account even within a day. Such a broker relies on technology and offers account setup services completely online, saving you time, effort, and money.
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Online Trading Platform
If you choose a discount broker for investment, you can buy and sell stocks online, using their online trading platform. Such brokers have a user-friendly trading platform, and you can invest or trade in securities from your workplace or the comfort of your home. You can monitor and gain access to real-time market information for informed investment decisions.
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Mobile Application for Trading
Apart from an online trading platform, discount brokers also offer their dedicated mobile applications for trades and investments. Similar to the trading portals, these mobile apps allow you to invest or trade in securities using your tablet or smartphone.
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No Financial Advice
To limit costs, a discount broker does not offer the option of providing financial services to investors. This makes it suitable for investors with decent knowledge of investments. If you are such an investor, this might be an affordable option to optimise market returns and savings at the same time.
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Basic Tools and Market Data
However, a discount broker might not provide you with financial advice, but they still provide you with investment tools and market-related information. If you opt for such a broker, with such tools and information, you can track market movements in real time.
What are the Benefits of Using a Discount Broker?
After understanding the discount broker meaning and its features, you should have an idea of its benefits listed below:
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Cost Saving
If you are an investor with a decent knowledge of investments and are looking for an affordable broker, discount brokers are suitable. They offer you basic investment services with a minimal brokerage fee, and a few may have affordable AMCs for your convenience.
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User-Friendly Trading
A broker with a minimal brokerage offers you a mobile application, an online trading platform, etc. In addition, a discount broker facilitates basic investment tools and market data to make informed investment decisions. These apps or portals are intuitive and user-friendly, and you can manage your investment funds and execute trades easily using them.
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Customer Support
Even if you are a seasoned investor, there is always a chance of facing issues while investing that require immediate and expert resolution. Such brokers come with dedicated customer support channels, allowing you to ask for a resolution by contacting them via calls, emails or chats.
What are the Limitations of Choosing a Discount Broker?
Being a knowledgeable investor, before opting for a discount stockbroker, you must know their limitations as follows:
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No Personalised Investment Advice
When a broker is offering you investment services at a minimal charge, compared to a full-service broker, you do not get personalised services. A full-service broker provides portfolio analysis, personalised advice, etc. Thus, a discount broker becomes more suitable for self-directed investors.
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Lack of Additional Services
A full-service broker also provides additional services, such as retirement planning, estate planning, tax and real estate planning, etc. If you opt for a broker with discounts, you cannot enjoy such additional services as a discount broker does not provide such services.
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Limitations in Customer Assistance
Although such brokers have dedicated customer assistance channels, there are limitations compared to full-service brokers. They might provide a limited level of assistance that forces you to rely more on online resources or self-help tools when facing issues.
Which Discount Broker is Right For You?
Choosing a particular broker with low brokerage charges depends on your investment choices and expertise. If you have enough experience investing in securities markets, you can go for such a brokerage service provider.
Their cheaper commissions can save you an extra amount of money, helping you to get an optimised return. If you are more into investments in securities, like ETFs, stocks, bonds, mutual funds, etc., this type of broker is most suitable for you.
Tips to Choose the Right Discount Broker
Before opting for a broker with minimal brokerage charges, you must take note of the following tips to make an informed decision:
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Market Reputation and Reviews
You must assess a broker’s capabilities in investments, market experience and reputation before going with them. You can do this by checking the reviews of other investors to understand whether they provide a good service or not.
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Efficient Security Measures
When you are investing in market securities, you must prefer a security to safeguard your hard-earned money. Choose a SEBI-registered broker for reliability and enquire what security measures they use.
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Effective Customer Service
Although a discount broker has limitations in providing customer assistance, they are still helpful. Enquire about the available assistance channels and how long they take for a resolution.
Conclusion
A discount broker offers you investment services at lower costs in the industry and is suitable for experienced investors. While they lack personalised advice and additional services, easy account opening, dedicated application, etc., are their advantages.
FAQ’s
1. What services do discount brokers offer?
A broker with affordable brokerage charges offers you a dedicated online trading platform and basic market research tools, and data.
2. Are discount brokers suitable for beginners in the share market?
No, these types of brokers are not suitable for someone who is just starting investments. Experienced investors who can make self-directed investment decisions should go for it.
3. How do discount brokers charge fees for trades?
Most discount brokers charge flat brokerage fees. Others might not even charge for AMCs to make services more affordable.
4. Can I get personalised investment advice from a discount broker?
No, to make investments and trades more affordable, such brokers do not offer personalised services and help with trade executions only.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
