Things You Ought to Consider When Choosing Your First Stock Broker


There’s really no way around it.  If you wish to invest in shares, you’re going to need a stock broker who’ll carry out the actual buying and selling of shares on your behalf.

However, choosing a broker isn’t as simple as picking the one that charges the lowest fee (though it is probably the first thing you should think about).  In this article, iMoney shows you some of the factors you should consider when you are enlisting a stock broker for the very first time.

1) Stock brokerage fee

Stock brokers charge you a fee whenever you buy or sell shares.  For new investors with limited funds, every sen counts and therefore, it is probably best for you to consider brokers with lower fee, instead of the ones that charge a premium for services you may not use.

The difference between a broker who charges you 0.1% and a broker who charges you 0.6% is RM250 if you buy or sell RM50,000 worth of shares!

To find out which broker has the lowest fee, check out iMoney’s share trading account comparison table.

2) Cash upfront or collateralised accounts

When opening a new share trading account, you broker may offer you the option of a Cash Upfront account, a Collateralised account, or both. For Cash Upfront, the brokerage fee is lower, but your trading is usually limited to the amount you’ve deposited into your trust account (i.e. if you have RM100 in your trust account, you can trade RM100 worth of shares). For Collateralised, your brokerage fee is higher but your trading limit is usually multiple times of the amount you’ve deposited or pledged to your trust account.

Regardless of the type of investor you are, make sure you choose a broker that offers you the account that fits your investment strategy.

3) Minimum

Some stock brokers insist that you deposit and hold a minimum balance on your trust account in order to trade shares. This may range from as low as RM1,000, to as high as RM10,000 or more. If you have limited funds for investment purposes, your best bet is to go with the one with the lowest minimum, or one with no minimum requirement at all.

4) Online trading platform

Whilst there are some investors who continue to work closely with a stock broking agent or remisier for share trading purposes; many new-generation investors are now switching over to online trading platform in order to personally oversee and execute their trading activities. If you fall under the second category, it wouldn’t hurt to browse through online forums and see what people are saying about the online trading platform of your broker of choice. Remember: frequent outages are not a good thing when your money is involved!

5) Withdrawal of money

Think about how you want to withdraw your money from your share trading account (which you will do, sooner or later). For a bank brokering unit, it may involve making a simple phone call or tapping on a button online to have the money transferred to a linked savings or current account. For a securities firm, the process may be somewhat longer as it involves the drafting, banking-in and clearance of cheques into your bank account. Though you’ll eventually get your money either way, the speed of the withdrawal differs and may be a big deal to certain investors.

6) Reliability and reputation of stock broker

When you are going to trust a company with a huge amount of money, you should always go out of your way to find out how reliable it is. Bank brokering units are generally trustworthy as they are tied to the banks themselves, but that is not to say that securities companies, especially the big ones, aren’t dependable too. A good approach is probably to ask a more established share trader about the broker he’s using. But if you don’t have that kind of network, remember the Internet is your friend.

Need more information about share trading in Malaysia? Find out how you can start trading shares in 4 simple steps!

Ready to start investing in shares? Check out iMoney’s share trading account comparison table and discover which stock broker suits you best.


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