Once you decide to invest in the stock market, you first search for a reliable broker through whom you can trade in the stock market. There are two options for you either a conventional stock broker or a discount broker. Discount Broker is relatively a new term in the share market world but has become fancy for investors nowadays. Many new entities are entering in stock market as discount brokers. So, you must also be wondering to know about discount brokers. Let’s start

What is a Discount Broker?

A ‘Discount Broker’ is a stock brokerage firm like any other conventional brokering firm but offers to the investors trading at reduced brokerage rates. Discount Brokers simply execute buy and sell orders for their clients mostly online-based but do not extend any advisory or other services to them. Discount Brokers simply provide online trading interface to their clients where they could trade at nominal fees. They could offer lower fees because they almost do business exclusively online. Thus, their operational and infrastructural costs are lower as compared to conventional brokerage houses.

Further, they don’t offer services like customized research and planning, personal consultations, or tax planning to their customers. Still Discount Brokers are attracting young and tech-savvy individuals, who form the new generation of traders.

Choosing Between Conventional Brokerage House versus Discount Brokers

Choosing between conventional brokerage houses like Anand Rathi, Angel Broking or discount brokers like Zerodha, Upstox is a very confusing question and is entirely dependant on your knowledge and vision about stock markets. Suppose you are having money at your disposal but you don’t have any idea about stocks to invest, then going with a discount broker may be disastrous for you as you may end up losing your money in wrong stocks without any advisory. At the other side, you may have to pay high brokerage to conventional brokers for same trades you make. Let’s have a closer look of the difference between two:

Once we have got basic understanding about the meaning and difference between the conventional and discount brokers, you will have to make a decision as to whether you want to trade through a conventional broker or through discount broker. So, lets summarise pros and cons of discount brokers for better decision making.

Pros of Discount Brokers

Discount Brokers are technology driven trading platforms which comes with following benefits for their clients:

• Lower Brokerage: Discount Brokers don’t charge brokerage on % basis rather they charge a flat fee per order. Thus, the brokerage charged by them is very nominal for the trader. Brokerage certainly matters for stock traders especially for intra-day traders.

• Fully online services: Discount Brokers provide 100% online interface for stock trading and reports. It becomes easier for an educated investor to trade through online platform provided by them. Trading apps of discount brokers is easily downloadable on mobile thus, the investor is always aware about movements in the prices of their stocks.

• Better Reporting: Discount Brokers provide trade reports in an online mode on their mobile/ web interface. These reports can be downloaded anytime anywhere easily. Therefore, an investor can easily know about their profits and holdings at any point of time.

• Online learning guides: Discount brokers like Zerodha, Groww make efforts for educating investors on the basics of trading and investing through online content like videos and webinars etc.

Cons of Discount Brokers:

• No relationship Manager: Conventional brokers provide the facility of relationship manager to their clients with whom they can discuss about their investments. This facility is not available in the case of discount brokers.

• Lower customer service: Since discount brokers are known to operate in online mode, customer services available with them are lower or minimal.

• No research and advisory: Conventional brokers have inhouse research team which publish research reports about various stocks on regular basis. This helps investor to take timely decision about their investment. This facility is missing in case of the discount brokers.

• No Portfolio Management Services: If you are an investor with large amount at your disposal, you will wish to have portfolio management services from your broker. This feature is missing in case of discount brokers.

Top 10 Discount Brokers 2022

Following is the list of top discount brokers 2022 which will help you choose the right one, if you are going with discount brokers:

• Zerodha
• Groww
• Angel One
• Upstox Broker
• 5Paisa
• Paytm Money
• Fyers Broking
• Alice Blue
• Bajaj Financial
• SAMCO

Conclusion: Both conventional brokers and discount brokers have pros and cons. However, the current trends indicate that tech-savvy new generation prefer discount brokers over the conventional stock brokers. If you are still confused, we would suggest you to review capital at your disposal and knowledge you have about the stock market. If you have minimum knowledge about stock market, you should choose a conventional broker. But if you wish to do high-volume trading and have necessary knowledge, you should go with a discount broker to save your transactional cost. Best of luck!