Are all Stockbrokers the Same?

Everyone interested in investing in shares will need a stockbroker to help them buy and sell, since the general public are not licensed to do this. But not all stockbrokers are the same; their difference lies in what services they offer.

* Full service stockbrokers. Stockbrokers who offer what is called a full service offer a great deal of useful advice on the buying and selling of stocks, shares and other options. They not only tell you which shares are best, but which are best for you. This is because everyone has a different financial goal and a different level of risk they are comfortable with. So full service stockbrokers will tailor an investment plan especially for you and will do research into it and buy and sell the stocks, shares and other components for you. They will also charge you a fee commensurate with their knowledge and abilities, but you can be sure that your losses will be small – at least most of the time.

* The non-advisory stockbroker. Investors who are more confident in their ability to buy stocks and shares that will give them a good return on their investment will only need a non-advisory stockbroker. These stockbrokers will simply buy whichever shares you tell them to – and of course, sell them when you decide to sell. You could be making a big mistake and they may know it, but they will not be able to tell you so if they are in the non-advisory stockbrokers category.

Seven Tips to Find the Right Online Broker

Once you decide to buy shares you will need to find the right broker. Having a broker is vital to buying shares as you cannot do so without one. Increasingly, the online broker is very popular as they usually charge less and can be contacted via the computer often more quickly than by telephone. Here are some tips to choosing the right online broker. 

* The online broker should hold an Australian Financial Services License issued to them by ASIC.

* An online broker should have a variety of trading tools on his website such as charting facilities, the latest stock news, and up to date stock quotes.

* You need to ask the online broker how fast their orders are being executed. Online trading is much faster than other means – but they still have to be there to do it. Fast orders not only save time, they result in more control over your trading.

* Does your online broker get paid by order flow? If he gets a commission for sending orders to certain market makers it can lead to a conflict of interest. You need to know he has your interests at heart.

* Has your broker made an online trading demonstration platform available? If so how much does it cost to access it?

* If they do have trading platform software available is it easy to use and modern? If it is slow or unmanageable it will cost you in terms of lost opportunities and thus, profit.

* Do they have stop loss orders available to mitigate your risk further?

What is Margin Lending?

Margin lending is part of investing in shares, although you can invest in shares without margin lending. What happens with margin lending is that you borrow money to invest in or buy shares with. This money is often offered by the banks and you are required to open an account in that bank with which to transact. The money you borrow is added to your own principal to buy the shares, but the bank controls them so they are not actually your own shares.

While margin lending is looking on by favour by some - including the banks that offer you the money – it can be quite risky. While you do stand to make a lot more money than if you only used your own money, you also stand to lose a lot more. The big problem is that if you borrow money to invest in shares and they lose value, you will lose money that you do not own.

The banks don’t want this to happen because it means they will lose money too, so they require you to keep a certain amount in your bank account to cover a possible loss. If the value of the shares falls below this you will get a margin call. You either have to put up the money to cover the loss or the banks will sell off the shares – at the worst possible time for you. Shares should be sold off when they are worth more than you paid for them, not less. Of course, if you pick well and have lots of luck with the share price rising, you do stand to make more than if your portfolio were debt free.

Why You Should Learn to Trade

Trading on the stock market is not quite the same as investing, which is done on a more long term basis; trading is done in the short term. Anyone interested in trading on the stock exchange should first learn to trade properly by gathering as much knowledge about it as possible. This can be done through your own reading, or by paying for a course that will help you learn to trade. Such courses can be found online, or you can buy books about trading.

One good way to learn to trade that is offered by some stockbrokers is to have trading software that you use to imitate real trading. This can give you the confidence to trust your decisions as you learn to trade. The whole thing is set up as if you were really trading except of course you do not really buy and sell the shares. But all records are kept of your buy and sell decisions and you can see at a glance how much profit or loss you would have made if you had been doing it in real life.

While it is not hard to learn to trade shares in the stock market, it is a fairly risky way to make money for those who do not really have professional knowledge of the stock market. Of course, when you learn to trade properly you may depend on the expertise of a stockbroker rather than on your own expertise. In this way your losses may be fewer, but even then you are sure to suffer a few losses before getting that good profit you were after.

Benefits of Investing in Shares

Plenty of people are actually investing in shares in a passive way through their superannuation, but others like to take a more active role and have an investment portfolio of different shares that they invest in. Since investors in shares have the ultimate goal of making money from them there are several benefits of investing in shares as opposed to real estate.

* The main benefit to investing in shares is that there is a high level of liquidity. When compared with owning real estate and selling it to get a profit, owning and then selling shares can be done in a fraction of the time. So you can get your money back really quickly with shares, where you may have to wait months to sell your property.

* The 1200 companies that offer shares make it easy to choose which ones to buy to meet your needs. With real estate there are only a few choices, e.g. rental properties or commercial properties.

* You can buy shares for a smaller investment than real estate requires. That said, you can also buy shares in real estate – but you will not own the whole thing.

* You get a share in the company when you buy shares, so you get a small say in how it is run.

* You can make a profit two ways, by getting dividends from the company or by selling your shares once their value has increased.

* You don’t need to get a mortgage to buy shares like you do with real estate.

Reducing the Risk of Contracts for Difference

Every kind of investment carries with it some kind or amount of risk and Contracts For Difference are no exception. In fact, they could be considered as a high risk investment because you can easily lose more than you invest. However, there are ways to mitigate this risk somewhat and one particular way is to use what is known as a Stop Loss Order.

The Stop Loss Order can be set to whatever you choose. For instance you may buy cfds at $3.00 each and set the Stop Loss Order at $2.60. A stop loss order signals the cfd provider to close your position so that you do not sustain further loss. Unfortunately such stop loss orders can be slow in going through if there is a rush of like orders. And in the case of a dramatic and quick fall where liquidity is in short supply, you may still lose a great deal more than you intended. This is more of a problem on equity prices than indices and currencies that usually experience very active trading.

However you can also have what is known as a Guaranteed Stop Loss Order (GSLO), if your cfd provider offers it. You have to pay an additional charge for this benefit and there are certain restrictions imposed, but it is better than being subject to large losses if the market moves against your plan. So if you are planning to get into investing with cfds it is wise to find out all about how you can best reduce the risks inherent in such a product.