Low brokerage and low-cost discount brokerage in India

Since the advent of online share trading in the early 2000s, investing in the stock market has become a seamless and convenient process. Manual paperwork driven stock trading is replaced by online trading, wherein investors can invest at the click of a button from the comfort of their home. This coupled with low-cost internet and market slump during the pandemic, when good quality stocks were available at discount to their intrinsic values, resulted in the rapid growth of stock trading and discount brokers in India.

Discount brokers as the name suggests are brokers who charge a discounted fee, typically ₹20 per order. This is in contrast to the ‘percentage on trade value’ brokerage model run by traditional brokers. With huge brokerage savings at stake, low brokerage or low cost discount brokers rose in prominence and popularity in the last few years. In this article, we will have a look at the different types of brokers in India and how to choose the right broker for you.

What role does the stockbroker play?

A stockbroker facilitates the buying and selling of shares and other securities for its clients and charges fees in exchange for its services. The fee is termed as brokerage.

Typically, there are two types of brokers in India based on the services offered and fees charged:

• Full-service broker

• Discount broker

• Full-service brokers:

  In addition to facilitating the buying and selling of shares and other securities on the stock exchanges, full-service brokers also provide value-added services like research, advisory (trading recommendations), portfolio management services (PMS), wealth management, a personal relationship manager, and local branch support.

• Discount brokers:

  Also known as flat-fee brokers or budget brokers, discount brokers have a business model that is highly technology-driven and, hence, has low operational costs. They mainly offer online trading software to their clients. Unlike full-service brokers, most discount brokers don’t provide add-on services. As a result, they are able to offer their trading platform with low brokerage fees.

Low brokerage and low-cost discount brokerage

Low-cost discount brokers offer a technologically advanced trading platform at a fraction of the price compared to full-service brokers. A low-cost discount brokerage firm follows a simple business model where they charge a set fee for each trade.

How to choose the right broker?

The choice between a discount broker and a full-service broker is made based on the objectives and timeframe of the investment.

For traders who execute several trades throughout the day, it is advantageous to work with a discount broker because they charge the lowest brokerage or a flat fee regardless of the size and volume of deals. Discount stockbrokers are also for investors looking to make a short-term investment. This is because they provide the most affordable brokerage fees. Low brokerage fees help minimise the overall cost of trading and increases the effective return on investment. Further, there are new-age brokers like m.Stock which offer a free demat account opening with zero-brokerage across equity delivery, mutual funds and IPOs.

On the other hand, if you’re new to the markets and are looking for personalised guidance and financial planning, you may want to choose a full-service broker. They have research analysts and financial planners who can give you expert financial advice about the current market trends and can help develop a customised investment strategy for a fee. Having said that, there are several free resources on the internet and social media that provide you with all the knowledge and insights about the markets. Thus, in today’s day and age, choosing a full-service broker doesn’t make sense for most investors.

Conclusion

Despite the number of stockbrokers available in India, selecting the best broker that offers the lowest brokerage with the ease of trading is still difficult for many new and seasoned traders. You must choose a stockbroker who meets your financial goals and provides services at a reasonable cost. One such trading platform is m.Stock, which offers a cutting-edge trading platform with zero brokerage on equity delivery, IPO and mutual funds.