Investing Tips

Pros and Cons: Eliminating Brokers When Purchasing Penny Stocks

4 Aug , 2016  

Stock can be a lucrative investment with very high returns, if the rights moves are made. In stock trading, there is no rule that one has to use a broker. Therefore, it depends on the preferences of the individuals as the whether or not they use a broker in stock trading. If you are confused about whether to use a broker in the trading of your stock, here are some advantages and disadvantages to help you make a decision more easily.

Advantages of Using Brokers in Purchasing Penny Stocks

Expertise

Brokers who deal in the trade of shares will benefit you with their years of experience in the industry. They will easily locate stocks that can make you a profit. Also, they will benefit you with their consultation services on whether a certain stock will be profitable and after how much time.

Easier Transactions

Trading stock using a broker is very easy. First, with a broker you can get your sale proceeds in a given stock processed within a number of days, whereas this would take weeks if you were working directly with the company. Additionally, with brokers you are less likely to miss out on profitable opportunities due to limitation of Dividend Reinvestment Plans.

Flexibility

With the use of brokers, trading of shares is much more flexible. You can be exposed to thousands of company stocks with which to choose from. On the other hand, one might not have access to so many company stocks when they are working on their own.

Convenience

When dealing with a broker in buying penny stocks, the process becomes more convenient; you can go about your daily business while the brokers take care of your portfolio. Also, you will easily be able to track the purchase process. This is because professional brokers are expected to file on each trade for tax filing purposes.

Disadvantages of Brokers

Fees

The biggest disadvantage of using brokers to purchase stocks is the fee charged. While investing directly may cost you a little fee in terms of Dividend Reinvestment Plans fees, this may be a one-time thing. However, with brokers every time you require their services, you will have to pay a fee for the transaction. Therefore, the direct purchase of shares is much cheaper when the broker is out of the equation.

Bottom Line
Using a broker in the stock business proves to have its pros and cons. It is up to you to compare them and decide which case works best for you.


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