Stockbroker's creed: A person is a client until proven broke.
When you do decide to select a broker, don’t be fooled by the big broker names. A big brand means nothing - even more so in India where the laws are worth donkey poop. A big brand comes from brand management and brand name extension - it has nothing to do with whether the broker made money for his clients.
Go for the broker who offers you the lowest transaction costs. Most brokers in India charge INR 0.50p per 1000 rupees worth of trading. This is horribly expensive. The justification for this kind of charge is a standard cliché – “we give strong and solid advice”. Steer away from such rubbish. Your broker will immediately convert your stock to a long term stock the moment you realize that he has put lemons in your portfolio.
However, often the key reason of losses is not the market, but your broker’s inability to grasp the market dynamics and his lack of knowledge and skills. Equity markets are a rapidly changing phenomenon. SEBI rules have many loopholes that allow the high and mighty to get away with murder.
A good broker is supposed be able to provide all the necessary explanations to the client and be always available for communication. Always check the news in the market with what your broker is suggesting. I repeat here what I have said earlier – if the market and media is filled with hype about your stock – SELL IT. Ignore your broker and the long term growth story that he sings to you about the stock. You should be wary of such a broker and refuse his services.
However do keep in mind that good brokers are primarily interested in establishing long-term relationships with a client and do help clients. Just make sure you have a good one.
Happy Investing!
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