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Guidance Document that directs an inexperienced investor

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Develop a guidance document that directs an inexperienced investor through a systematic process of selecting a securities broker and researching investment alternatives. This should be a detailed "how-to" chronology.

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Develop a guidance document that directs an inexperienced investor through a systematic process of selecting a securities broker and researching investment alternatives. This should be a detailed "how-to" chronology.

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Steps to select a stock broker:

There are generally two types of brokerage firms: full-service and discount firms. A full-service firm provides broking plus advisory services and usually charge a premium fees for their services. A discount brokerage firm make securities purchases and sales at a lower commission but generally do not provide advisory services.

A novice or new investor should go for a full service brokerage firm only as he needs advisory services also, apart from the usual broking services.

To start with, an inexperienced investor will shortlist names of securities firms, based on the advertisements, word of mouth referrals from friends, relatives, media reports, etc. After he has shortlisted few names, the following steps can be taken:

1) The first step in selecting a stockbroker is to verify about his legal affiliations, credentials, etc., such as registration with regulatory bodies (SEC, NASD,etc.) and professional certifications such as Series 7 and 63 Licenses. This will ensure that the broker is affiliated with the legal authorities and is duly regulated under the securities law.

2) Once the legal considerations are verified, the next step is to see the gamut of ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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