Suresh Inamdar had important information about a company trading on the BSE. With the anticipation of buying into the stock, he immediately called up his broker. His broker would act as a spoilsport. He nonchalantly declined trading in the stock stating an unwarranted argument that the stock?s trading is not available with the firm and he is not aware of the development. It dawned on him that another broker of a brokerage offered trading in the stock with equally relevant information about it. He realised the difference: the broker and his keeping-up-to-date skills. Considering the markets are in a more volatile than ever, you might end up in the same position as Inamdar. Hence, it becomes crucial to choose a broker, who would keep you abreast of the developments of companies and the markets per se. Here is quick take at what your broker should provide you while you pay his/her services.

The nitty-gritty

You should first determine whether you want to be an investor or a trader. The reason: the cost structure varies. It varies for the type of investor because the strategy of making profit is not the same. An investor could buy a scrip/company and hold it for two to three years or may be more than that, while a trader would try to earn profits daily or on a weekly basis.

It must be noted that every equity participant has own way of working and that differentiates an investor and a trader. There may be a case when an investor would try both strategies but he may be successful in only one strategy. So you must understand your own limitations and risk appetite and then jump on the wagon.

Being a long-term investor, you could get lured by the lowest intra day charges and tips on mobile as claimed by the relationship manager (RM). But you may actually require a delivery-based fee, which could be little higher than the market-rate. On top of that you may forget or miss the opportunity to bargain on delivery-based brokerage, which is where the major cost would go.

Delivery-based fee is charged on buying a stock and holding it for more than a day. While intra day charges are levied when you buy and sell a stock simultaneously before the market closes (square-off your open position i.e., if you buy them before closing you must sell and vice versa).

Now, due to competition, some of the brokers are providing zero demat charges. Demat charges are levied annually. Only an account opening fee would be charged.

But this type of product has limited benefits/features. This type of product is actually beneficial for investors who invest for the long-term and trade frequently. It would be cost effective, as the investor is not being levied an additional cost of the demat account fee, also termed as annual maintenance charges (AMC), every year.

A trader on the other hand requires an altogether different product. While an investor would be much more passive in investing, a trader would be much more active and incur a higher cost as well. In this case, a trader would naturally pay a low brokerage and get daily tips on mobile. Also, the RM has to ensure that he maintains a relationship with his clients who are traders. A trader gives maximum revenue to a broker irrespective of whether one earns a profit or loss. And in return, expects a prompt service from his RM.

Other facilities

A broker can also provide an online IPO (initial public offering) facility, which reduces the hassle of filling in forms. But both systems have their own advantage, as the physical form gives you payment flexibility of two to three days. In case of an online IPO one should keep the balance at the time of applying. Some of the brokerages have an offline software platform for trading from home and an online facility.

It is better to go for an online one, if an investor is working because it can be accessed from any place having an internet facility. Roaming flexibility is not available in case of offline software, where it can be accessed only from the computer where it is loaded.

However, every broker has a phone facility and can trade easily. One should also note that all the brokers don?t give the facility to buy all scrips available in the stock exchange.

You may not be allowed to buy Z, S, T group stocks, while they may be fundamentally strong stocks. It is required to confirm from the RM or the branch manager or from the customer care on this issue.