How to Select your Brokerage Firm?

There are many brokerage firms available in the market to choose from. It is the brokerage firm which helps you open your account and makes it possible for you to invest and transact on Pakistan Stock Exchange (PSX). There are more than 200 brokerage firms active in Pakistan who can help you invest on the Stock Exchange.

Here's your step-by-step process for opening a brokerage account

• 1. Determine the type of brokerage account you need.
  2. Compare the costs and incentives.
  3. Consider the services offered.
  4. Decide on a brokerage firm.
  5. Fill out the new account application.
  6. Fund the account.
  7. Start researching investments.

  1. Determine the type of brokerage account you need

  What are your investment objectives? If you simply want to invest for a rainy day or for a certain relatively near-term goal, and don't necessarily want your money tied up until you retire, a traditional brokerage account is the way to go. These accounts don't have tax advantages – you may have to pay tax on investment profits and dividends – but you are free to withdraw your money whenever you'd like.
  If you choose a cash account, your broker will likely ask if you want margin privileges, which basically means that you can borrow money to buy stocks, with the stocks in your portfolio serving as collateral. You'll pay interest on the borrowed money, and there are some inherent risks involved with investing on margin that you should be aware of.
  2. Compare the costs and incentives
  These days, many of the biggest discount brokers offer commission-free trading. They may also offer you a discount to reward you for certain actions, such as trading at a high volume or maintaining a savings account with the same company.
  That said, it's important to review the brokers' full pricing schedule, particularly if you plan on trading anything other than stocks (options, funds, bonds, etc.), as these often come with their own costs.
  Finally, many brokers offer incentives in order to attract business, and you don't need to be a millionaire to take advantage of them. I'm not saying that a good incentive all by itself should sway your decision, but it's definitely a piece of the puzzle worth taking into consideration.

  3. Consider the services and conveniences offered

  Pricing isn't everything -- especially for new investors. Of course, all other things being equal, it's best to find the lowest price, but here are a few other things you need to consider when picking a broker:
  • Access to research – Many brokers provide their own stock ratings, as well as access to third-party research from firms such as Standard & Poor's and Morning star.
  • Foreign trading – Some brokers offer the ability to convert money in your account into foreign currencies in order to trade on international stock exchanges. If this is important to you, make sure the broker you choose allows this.
  • Trading platforms – The various brokerages offer a wide variety of trading software and mobile apps, and many actually allow people to test out their platforms before opening an account. For example, Fidelity offers a demo version of its Active Trader Pro platform for prospective clients to test-drive. Also, read some reviews of brokers' mobile apps if being able to access your account on the go is important to you.
  • Other features – This isn't an exhaustive list, so before you choose a broker, be sure to spend some time on its website exploring what it offers.

  4. Decide on a brokerage firm

  You've gathered your information about various firms' costs, fees and they conveniences they offer. For each brokerage, you should weigh the pros and cons as they pertain to your investment objectives, and determine the best overall option for you. 

  5. Fill out the new account application

  You can apply to open a new account online. You'll need some identifying information. You may need to sign additional forms if you're requesting margin privileges or the ability to trade options, and the broker will need to collect information about your net worth, employment status, invest able assets, and investment goals.

  6. Fund the account

  Your new brokerage will probably give you a few options to move money into your account, including:
  • Electronic funds transfer (EFT) – Transferring funds from a linked checking or savings account is a convenient way to fund the account. In most cases, the funds will post to the account on the following business day.
  • Wire transfer – The quickest way to fund your account. Since a wire transfer is a direct bank-to-bank transfer of money, it often takes place within minutes.
  • Checks – Acceptable forms of check deposits and fund availability vary between brokers.
  • Stock certificates – Yes, these still exist. If you have a paper stock certificate, it can be deposited via mail into an online brokerage account.
  As a final note, when funding your new account, be sure to keep your broker's minimums in mind. Many have different minimums for taxable accounts and retirement accounts, and they also may have different minimum requirements for margin accounts.

  7. Start researching investments

  Congratulations on taking the initiative and opening a brokerage account -- your future self will thank you for taking this important step on the road toward financial security.
  Now comes the fun part: investing. Before diving in, it's a good idea to spend some time learning the basics of how to responsibly choose stocks, bonds, and/or funds, as well as how to create a well-diversified portfolio. Check out some of The Motley Fool's other content and services, particularly 

  OK, now what?

  Now that you know how to open a brokerage account and start investing, it's time to do exactly that! i have ranked and reviewed all of the top online stock brokers - simply click here to see the results and confidently pick the right brokerage for you.

  Using the wrong broker could cost you serious money