What is a stock broker?
A stock broker is a trading platform (or person) that facilitates the buying and selling of marketable securities like stocks and exchange-traded funds (ETFs). Through a stock broker, you can open a brokerage account, a specialized financial account designed to hold investments and cash.
The term is often used interchangeably with “brokerage,” which is technically the name for a business that employs brokers or acts as a broker to facilitate trading.
When you want to buy stock in a company, you can’t simply call up the company and buy shares, and you can’t just walk into your local bank and invest. You need a specialized brokerage account, and that’s where stock brokers come in.
What are the different types of brokerage accounts?
There are two main types of stock brokers: discount and full-service. They each come with distinct costs and levels of service.
Discount broker
A discount broker is a company that lets an investor buy and sell securities online. As a customer, you can direct the process of buying and selling stocks or sign up for an account with a robo-advisor that’ll automate your investments. Many discount brokers have features that help you decide how to direct your trades, as well as educational tools to help you learn how to invest, but typically there’s no human broker taking and filling your orders.
True to their name, discount brokers are much cheaper than full-service brokers, and most offer zero-commission stock trading. For the vast majority of investors — especially the beginning investor — a discount broker is the best choice. That’s why our picks for the best trading platform for beginners are exclusively discount brokers.
Full-service broker
Think of a full-service broker as an old-school broker. It’s a firm that usually operates out of a