How Do I Pick What Share To Buy?

Research, research, research! That’s the key to picking the winners. Granted, you’re not a qualified financial professional with access to the information available to equity analysts, however you can hire someone to pick them for you or you can do it yourself, with some research and basic information.

A stock broker isn’t what they used to be. The heady days of the 1980’s pained a slimy and money-hungry picture of stock brokers but nowadays, with more safeguards for investors in place – stock brokering is a competitive industry – with brokers all vying for your investment dollar.

Stock broker, who?

There is much confusion over the term “broker”, as many believe this is the person that you consult and receive advice from when you want to trade shares – this is not the case. A broker is a stock broking firm and offer two main services. Firstly, a full service broker will offer personalised information and tailored advice. You can see them more like a financial planner that solely concentrates on equity. You can ask them for ideas or you can ask them for advice on portfolio mix. The benefit of having a broker is their access to information and ability to obtain shares in oversubscribed floats (when there are more buyers than sellers). This type of service costs around $150 per trade or for large trades, 2.5% of the total amount traded.

The second type of brokers are the “execution only” type, which have seen a great proliferation in recent years – with the most popular being Commsec and E*Trade. They simply take your order and process the transaction. Typically, each trades cost between $15-30, substantially lower than with a broker.

Which broker should I choose?

If you are new to the game, it might be useful to start with a broker and establish if they add value to your own research. Be wary, as they are paid based on the volume you trade, therefore their incentives may not be linked to your benefits.