What Are the Pros and Cons of Buying Stocks without a Stockbroker?

The idea of buying stocks without a stockbroker is on the minds of more and more investors today. Unlike decades past when many investors felt they were not up to understanding market movements or how to prepare accurate projections, the wealth of data found on the Internet, along with efficient electronic tools that can aid in the assessment of a stock, bond issue and other forms of investments, has led to more confidence in being able to manage the buying and selling for the portfolio without a lot of input from brokers. While it is certainly possible to go about buying stocks without a stockbroker, it is important to weigh both the pros and the cons of this activity before proceeding.

One of the benefits of buying stocks without a stockbroker is that investors can avoid many of the charges that are associated with having a broker function as the agent for the trades. This translates into more money that can stay in the hands of the investor. While there will still be some fees involved related to interacting directly with the market, the savings can be significant, especially if the investor tends to trade on a daily basis. In addition, an investor who wants to manage his or her own trading activity can often open a trading account with a small balance, rather than having to meet the higher minimum balances required by many brokerages. For someone who is just starting out and doesn’t have a lot of money to invest in the stock market, this can be a great way to pick up a few investments with low volatility, begin building a portfolio, and gradually gain confidence in the ability to make trades.

There are also some potential liabilities associated with buying stocks without a stockbroker. Brokers often bring to the table a great deal of knowledge and experience that can help even a seasoned investor. In addition, brokers are often aware of current events that investors may or may not be aware of prior to placing an order. It is not unusual for brokers to be in a position to provide clients with information they had not considered prior to deciding to buy or sell a given stock, simply because the news about a relevant event had not reached them yet. From this perspective, a competent broker can save an investor a great deal of money.

There is no one right way to go about buying stocks. For investors who have the time to stay on top of what is happening in the marketplace and are confident in the ability to assess that market and project future movements, buying stocks without a stockbroker can work very well. Investors who are less sure of their ability to read market conditions and determine the future movement of the stocks traded in those markets may find that relying on the services and expertise of a broker may be in their best interests in the long run.