How Does Brokerage Work?
Brokerage is a fee charged by a brokerage firm for acting as an intermediary and facilitating the buying and selling of stocks. Payable every time an investor transacts in the market, brokerage is one of the biggest costs that an investor has to bear. Hence, understanding how brokerage works is crucial before investing your hard-earned money.
How to Calculate Brokerage on Trades
Brokerage charged on trades is primarily dependent on the type of broker. Traditional full-service brokers charge a percentage on the total trade value whereas discount brokers charge a flat fee irrespective of the trade size. A third type of account, free demat account provided by m.Stock. They charge zero brokerage on equity delivery, mutual funds and IPOs.
Let us understand how brokerage works and is calculated on trades carried out under different types of brokers with the following example: Suppose an investor purchases 1,000 shares of Infosys Ltd. at ₹1,450 each. He sells these shares after a week at ₹1,500 per share.
Brokerage charged by full-service brokers - % of total trade value
| Total Brokerage Charged (Buy + Sell) | ₹1,475 |
|---|---|
| Total Turnover (Buy Transaction) | ₹14,50,000 |
| Brokerage Charged on Buy Transaction (assuming 0.05% brokerage) | ₹725 |
| Total Turnover (Sell Transaction) | ₹15,00,000 |
| Brokerage Charged on Sell Transaction (assuming 0.05% brokerage) | ₹750 |
Brokerage charged by discount brokers - flat fee
In the case of discount brokers, a flat fee of ₹20 per executed order is applicable. So, the total brokerage charged in the above example will be ₹40.
Zero Brokerage charged by m.Stock
While the brokerage savings between full-service and discount brokerage is humongous, there is a way to bring down your brokerage to zero. Yes, in the above example, if you had transacted with m.Stock, then your brokerage payable would be ₹0 since m.Stock charges zero brokerage across equity delivery, mutual funds and IPOs.
Benefits of m. Stock’s Demat Account
Now that we understand how brokerage works, let us look at the advantages of opting for m. Stock’s free demat account:
Zero Brokerage
m.Stock offers zero brokerage fees on equity delivery, mutual funds and IPOs.
Global Expertise
m.Stock’s parent organisation, Mirae Asset, is the number one broker in Indonesia and South Korea. With 25 years of experience in global markets, and 16+ years in the Indian markets, m.Stock customers benefit from research and insights of a global investment powerhouse with their free demat account.
Superior Trading App
With m.Stock’s superior trading app and web platform, advanced calculators, and timely notifications, you can take quick investment decisions that are backed by sound knowledge and analysis.
Unique Features
With m.Stock, you can access a host of features such as 1 click order placement, watchlists, portfolio overview, and other tools which assist in trading and investing.
Conclusion
When choosing a broker, always ensure to opt for a broker with the lowest brokerage charges, because the higher the brokerage, the lower your overall profits. With m.Stock’s Zero Brokerage proposition, you get to keep all the profits without paying any brokerage. So, open an m.Stock free demat account today!
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FAQ
What are the functions of a brokerage firm?
A brokerage firm acts as an intermediary and helps investors buy and sell stocks in the market. Apart from this, brokers also provide market research, insights, financial advisory, and margin financing.
What are the different types of brokers?
The different types of brokers include full-service brokers, discount brokers, and now m.Stock has launched India’s first Zero Brokerage services.
What should you look for in a broker?
An ideal broker must charge low brokerage whilst providing top-notch trading platforms and tools. Additionally, the broker must be reliable and well capitalised.