How to choose the best stockbroker for beginners
By Nairobi Stocks Review
You will need a stockbroker if you want to invest in company shares. There are dozens of stockbrokers in Kenya. But all brokers are not same. To avoid frustrations in your investing journey, you will need to find the right broker. How do you choose the best stockbroker?
In the stock market, brokers act as the middlemen. First, the broker will manage your CDS account. If you want to buy shares, they will take the order and purchase the shares on your behalf. Similarly, if you want to sell shares, they will take that order and sell the shares for you. Brokers charge a fee to facilitate stock trading for clients.
How to choose the best stockbroker
If you are a beginner investor, it helps to know how to choose the best broker. The best way to find a good broker is to shop around. While doing so, you need to have a map to guide your steps. Below are some of the important factors to consider when choosing a broker:
- Trading fee
- Minimum initial investment
- Online access
- Account fees
Let’s go over each of these to know what you should look out for when selecting a broker.
Mind your head…check the trading fees carefully
What brokers charge to buy or sell stocks for clients is called trading fee or trading commission. The fee is quoted as a percentage on the investment amount and usually varies across brokers. If you want to keep your investment costs low, then you will need to identify a broker with low trading fees.
Cut your coat according to your size…know the minimum initial investment
The rule on the Kenyan stock market is that the minimum amount of shares you can buy per transaction is 100 shares. It means that if a company’s shares are trading at Ksh10 apiece, then you could start investing with as little as Ksh1000.
However, some brokers have minimum starting capital requirement. For example, a broker may require that you have at least Ksh20,000 in starting capital to invest with them.
Therefore, if you want to start investing small amounts of money, then you will need to choose a broker that doesn’t require an investment minimum or whose starting minimum you can afford.
Now loading…check if online access is available
People live busy lives these days. It means you may need the convenience of buying and selling stocks at any time you want. In that case, you will require a broker that offers online trading service.
Inspect the corners…know the account fees
Since fees can reduce your profit, if you need to watch out for them if you want to have a good investing experience. Make sure to find out if a broker charges a CDS account maintenance fee and the rates.
You may need to transfer your shares from one broker to another. Therefore, make sure to check a broker’s stock transfer fees before you start investing with them. Also, you may need to take a loan against your stocks. Find out if the broker allows it and the fee they charge.
Look before you leap
Finally, make sure you only deal with authorized brokers. Otherwise you could end up in the hands of scammers and lose all of your investment. Check here for a list of stockbrokers approved to operate on the Nairobi Securities Exchange.