Published on Thursday, April 11, 2019 by Chittorgarh.com Team
For small investors and beginners, online stock brokers come across as an excellent choice. In this article, we discuss the needs of small investors and beginners, qualities of online stockbroking firms and provide you with a list of Best online brokers for small investors and beginners in India.
Stock market investors or traders can be categorized in many ways. You can categorize them as a beginner or experienced depending upon their experience in trading. Similarly, another way of categorization can be on the basis of volumes of trading or trading value. There can be small investors, who trade occasionally and in small volumes. And, then there are big investors who trade frequently and have portfolio worth crores.
The trading needs of a beginner or a small investor is significantly different from that of experienced and big investors. For beginners and small investors, online stock brokers with low brokerage and limited services can be a great option.
The rise of internet usage in India and the subsequent digitalization of trading has led to the emergence of online share broking firms in India. These online brokers also called discount brokers have adopted an online business model wherein they offer services only online. They don't have any branches. From account opening, trading to customer support, all these are offered via desktop, web and mobile.
Due to the online business model, these stock broking companies save a lot of money on infrastructure and overhead expenses. They also offer limited services as against full-service stock brokers. So, unlike a full-service share broker, an online discount broker's service offering is limited to online trading and depository services. They don't offer research, PMS and investment services in bonds, mutual funds and IPOs etc. This helps them to save money on licensing and employees.
The low-cost business model of online stock brokers helps them to lower their brokerage fees. On average, top online discount brokers in India like 5Paisa charges Rs 10 per executed order whereas ProStocks charges Rs 15 per executed order.
The trading requirements of small investors and beginners are different from experienced traders.
Both small investors and beginners trade in small amounts. When you begin trading, you want to learn by placing small trades and see how things work. As you are placing small trades, a low brokerage helps you earn more profits. Online stockbrokers with their low brokerage charges can help new traders lower trading costs and increase profitability from the trades.
Traditional brokers have flexible brokerage plans for their trades which are mostly based on trading turnover. The higher the trading turnover, lower the brokerage and vice versa. Most of the small investors and beginner traders can't meet those turnovers and hence are charged higher brokerage. Online discount brokers charge a flat and fixed brokerage irrespective of trade value. This makes them more suited to small investors and beginners.
Most of the small investors and beginner traders have very limited service needs. They often don't need Portfolio Management Services, Investment Advisory etc. These services don't come free and are part of the overall services offered by full-service brokers. The range of services increases the brokerage costs. The limited service offerings of online discount broking firms, therefore, best meet the trading needs of small investors.
Beginners need educational resources and trading assistance to learn about various aspects of trading like how to place orders, features of the trading software etc. Online discount brokers are at par with full-service brokers in providing educational resources. For example, one of the top online broking firms in India, Zerodha has an online platform 'Varsity' to help traders learn various aspects of trading and investments. The platform has useful articles, videos etc., on trading and investments.
As we have seen, online stock brokers are best for small investors and beginners. And there are a lot of online or discount brokers in India. Which one to choose?
Who is the best online stock broker for beginners and small investors? It depends on individual choices. Here's how to pick the best online stock broker for your trading needs-
Prepare a list of top online stock broker for beginners and small investors in India. Here's the complete list of online stock brokers in India. Use this list, read in-depth reviews on each broker and then create a short list of top online brokers for small investors.
Now do a side-by-side comparison of the brokers in your lists. Compare them on brokerages, online trading software and other parameters. Pick the one that best suits your needs.
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