---
title: "What is a Discount Stock Broker?"
description: "What is a discount stock broker? Investing online as a self-directed investor with a discount brokerage can multiply your profits!"
canonical_url: https://trendshare.org/how-to-invest/what-is-a-discount-stock-broker
markdown_url: https://trendshare.org/ai/what-is-a-discount-stock-broker.md
published: 2013-11-17
last_updated: 2018-01-29
content_license: https://trendshare.org/about/disclaimer
---
# What is a Discount Stock Broker?

Source: https://trendshare.org/how-to-invest/what-is-a-discount-stock-broker
Updated: 2018-01-29
Unless you have millions of dollars and [a badge to wander the floor of a stock exchange](https://finance.zacks.com/stock-market-trading-floor-work-7265.html#section-4), you probably use a stock
broker to place your trades. If you don't know why you use the broker you're
using, you may be paying too much.

## What is a Full Service Broker?

Back in the olden days, back when "The Internet" was a thing you only heard
researchers or college kids studying computers talk about (if at all), before
smart phones and tables and wifi and 4G everywhere, if you wanted to buy or
sell stocks, you had to set up a brokerage account. Then you had to call your
broker on the phone and say "I want to buy some [Coca-Cola stock](/stocks/KO/view)". You'd get something in the mail a
few days later.

You'd also probably get phone calls or letters now and then recommending
that you put money in a specific mutual fund or buy a particular stock. You'd
[pay a small commission](https://trendshare.org/how-to-invest/broker-fees) for this privilege, of course,
just as you would for being able to talk to someone on the phone. The cost of
placing a trade (buy Coca-Cola, sell [Exxon Mobil](/stocks/XOM/view)) could have been $40 or more. You also probably paid an annual fee to
have a broker available on the phone.

For that money, you would get investment advice. At least, that was the
promise. You had someone at phone's reach (during banker's hours) who
understood your investment goals and who had the time and expertise and
interest to look at various stocks and bonds and funds to figure out what was a
good value and when you should buy it.

A *full service broker* is someone you pay an annual charge and a
large commission to to look over your portfolio and help you make decisions.
Remember: it took a lot of work to make the phone calls and set up the networks
to tell people on the floor of the New York Stock Exchange to trade on your
behalf.

## What is a Discount Stock Broker?

Of course, a lot of what you were paying for wasn't really worth it. Sure,
brokerage firms had overhead, but when the Internet became popular, it was
easier for people to go to a web site and click around and buy Coca-Cola shares
on their own. It was even easier to find out Coca-Cola's financials online than
to call a broker and have him or her send you a small mountain of paperwork, or
to go to the library and look through back issues of a [Value Line investing guide](http://www.valueline.com/Products/Classic_Print_Products.aspx).

People also discovered that the less money they paid for the privilege of
investing, the more money they kept from their investment profits.

A *discount stock broker* or *discount broker* is a trading
service for investors who manage their own accounts. (A *self-directed
investor* is an individual who manages his or her own portfolio.) If you're
comfortable picking a stock and deciding when to buy and sell it, you can often
save a lot of money by paying anywhere from $4 to $10 per transaction without
annual fees.

Obviously you *can* pay more money to get investment advice, but if
you only ever want to make discount stock trades, that's all you should have to
pay for.

## Should You Use a Discount Stock Broker?

If you're comfortable making trades on your own—doing your own stock
research, managing your own money—you're almost always better off [finding a discount stock broker](https://trendshare.org/how-to-invest/what-is-a-discount-stock-broker). You'll pay fewer fees
and keep more of your money. *If your goal is primarily cheap stock
trades*, use a reputable online broker with low fees.

If you're not comfortable choosing stocks on your own, you're almost always
better off [buying index funds](https://trendshare.org/how-to-invest/what-is-an-index-fund). In
particular, [buy the S&P 500 Index fund](https://trendshare.org/how-to-invest/buy-the-s&p-index-fund), hold it there for a long time, and get a very good return and sleep
well at night.

If you really need financial advice, you're almost always better off finding
a [fee-only financial planner](https://www.napfa.org/) rather than
paying [expensive broker fees](https://trendshare.org/how-to-invest/broker-fees) that may not have your
best interests in mind. Great financial advisors do exist. They'll cost you
money, but some of them can be very much worth it. Yet do you *know* how
to find one? (They're rare. They're going to be expensive.)

Should you trade online? Almost assuredly! With a cheap stock broker? Almost
always *yes*. Just as [a good index fund will beat a mutual fund](https://trendshare.org/how-to-invest/what-is-an-index-fund) in returns, investing on your own can give you
better returns than letting someone else invest for you. (If you haven't
calculated the best case, average case, and worst case numbers, then it's
probably not worth it.)