| Full-Service
Broker
A full-service broker provides a wide variety of services
from personal advice and research to retirement planning and
tax advice. All these services
are substantially more expensive compared to discount brokers.
Trade commissions could cost $150 or higher per trade. Full-service
brokers are also compensated based on how many trades you
make, not on the performance of your portfolio. This little
detail could motivate your broker to give you advice on trades
that are not in your best interest just to increase commissions.
Discount
Brokers
Discount brokers charge reduced commissions and are far less
expensive, but do not provide research and investment advice.
Some of the better known discount brokers are Charles Schwab
and Ameritrade. Discount brokers are paid on salary and not
on commission so there is little benefit to them personally
if you trade once a year or once a week.
In
regards to penny stock investing, it really is a toss up between
saving money or paying more to have “expert” advice
and access to more research tools. If you are a novice investor
that feels unsure in your own due diligence, it probably would
be best to use a full service broker until you feel comfortable
enough to make decisions on your own.
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