Choosing the right broker is like finding a good mechanic: to invest in stocks successfully, you need someone who knows what they are doing. Even though there may be many stockbrokers in Hong Kong, not all of them are equal. Some have excellent track records, while others are simply mediocre or even poor at their job.
Choosing the right broker for you is crucial as you will be entrusting them with your money. They are the ones that you will be asking to buy and sell stocks for you. You can read more here.
Determine what services you need
This is an essential step. It would be best to decide what you need from your broker before you begin looking for one. For example, a broker with lower commissions would be great if you only buy stocks every month or two. However, if you plan to buy and sell in bulk, this may not be the best choice because it could cost you more.
Research their track record
This is another critical step. For example, you may check out reviews of your potential broker online. If they have few or bad reviews, it could be because the company has a bad reputation, and you should consider looking for somebody else to manage your investments with. On the other hand, if they have many good reviews, then chances are that they’re worth considering as your stockbroker.
Check whether they’re licensed by SFC or FCA
Another thing you should do is research whether they are licensed by the Securities and Futures Commission (SFC) or the Financial Conduct Authority (FCA). If they aren’t, then cross them off your list. It would be best to only deal with licensed stockbrokers in Hong Kong because the government authorises them to provide their services. It also protects you financially by ensuring that they abide by specific regulations and guidelines.
Look for better offers
At times, you can find better offers than what your broker advertises. For example, rather than charging you higher commissions, some brokers may offer research options or other perks that come with an additional cost, which can be worth it if you’re on a tight budget. This is why comparing different brokers’ offers before choosing one is essential.
Check what other services they offer
Other services that a broker may offer to their clients include 24-hour phone support for emergencies, online reporting and management of your account, as well as low minimum investments. These are all beneficial features for somebody inexperienced in the stock market or who prefers to trade stocks easily.
Check their fees
Most people who trade stocks online use a broker to help them with their trades. As such, you must check what types of fees they charge and how much each one costs. These may include:
Commission
Some brokers charge commission on every transaction you make, while others don’t. If your budget is small, this could be an issue, but if not, then there’s no problem using a broker that charges commissions as they will add this amount to the cost of your stocks, which means more profits for you in the long run.
Order execution fee
This fee covers the costs involved in executing orders placed by customers on behalf of their clients. Depending on which stockbroker you choose, they can vary according to the number of stocks you’re buying. For example, if you’re only buying one stock, the broker may include the order execution fee in your commission; however, you’ll need to pay this separately if you want to buy more.
Account opening fee
If you decide on a broker who charges an account opening fee, consider waiting until they have a promotion or introductory offer, which can reduce or even eliminate the amount they charge for this fee.
Bid-ask spread
This is the difference between what somebody is willing to pay for a particular stock and what somebody else is willing to sell it for. While this doesn’t directly affect the final price of your bought/sold stocks, it does mean that there’s a higher overall cost if more of these transactions are taking place.
