What Is A Broker?

In order to invest, you need a brokerage account, and while that might sound like a hassle, it's actually a pretty good deal. You see, brokers do a lot for their clients. First and foremost, they allow for easy access to many stock exchanges across the world. If that sounds simple to you, trust me, it isn't pretty much. Every electronic stock exchange was coded by a different team of developers and multiple programming languages. Connecting all these various exchanges is truly a programming nightmare, which is why brokers spend millions of dollars developing platforms that can do that. Now some brokers make their platforms very simple to use and with minimal features in order to avoid confusing their customers. Other brokers tried to cram in as many services as possible into their platforms in order to attract more advanced clients. In any case, this is the first big advantage of brokers. They save you from all the complex coding use otherwise have to do yourself and present you with a single platform where you can do all of your trading. The next big advantage of brokers is the fact that they're very strictly regulated. America specifically is very serious about protecting investors, which is why both the SEC and FINRA exists to keep brokers in check and to make sure they're not fraudulent. Brokers then have to go through all the hassle of getting licensed, which involves passing numerous exams and is generally not on easy thing to dio. On top of regulations and licensing, the American government goes even further by providing what is known as S I P C, which is basically insurance for up to half a $1,000,000 worth of your assets held by a broker. The last big benefit brokers offer to investors is access to research. Things like dividend calendars and up to date analyst reports are very useful but oftentimes difficult to find for free on the Internet. Usually, brokers pay to get access to all of these publications and then provide them back to their clients for free or for much cheaper. So between the insurance, these of usage and the access to information, it's pretty good to have a brokerage account. Deciding which broker to use is the first major decision every investor has to make, and it's really down to three things. Firstly, commissions, different brokers charge a different amount for their services. And depending on how much money you have to invest, commissions can play a very big part in your decision. If you're starting out with a $1,000,000 commissions generally don't matter. But if you're going in with just 1000 the trading fees can really add up naturally. The second major factor is your starting capital. Some brokers just require a certain amount of money in order to open an account. Lastly, and most importantly, you have to decide how deep you want to go down the investing rabbit hole. If you want to just buy stocks and forget about them. Then you'll be happy with the locals broker providing minimal services. Then the more advanced you want to get with your investing, the better broker you're gonna need. But for now, let's stick with the simple stuff like stocks. In the next video, we're gonna learn what stocks are and why investing in them is a good idea.