As is our goal of making learning easy for you, we again discuss what a stockbroker is and what his or her roles are. Our main topic of discussion is shares so it’s important to know where in the whole process of stock trading does the stockbroker fits in.
In our previous post How Does A Stock Exchange Operate? We discussed briefly the role of a stockbroker. After you complete reading this post, we suggest you read that post to increase your knowledge on how, our exchange, called the Port Moresby Stock Exchange (POMSoX) works. It’s quite simple than many think.
Enough said. Ok! So what is a stockbroker? Let’s start with an example. Think of a big fresh produce market like the Lae main market located in the heart of Lae city.
In Lae main market, buyers and sellers of fresh produce physically present themselves to do the buying and selling.
Now in an exchange like ours, the POMSoX, buyers and sellers don’t buy and sell fresh produce. Instead they buy and sell SHARES, which as defined earlier is the basic unit of a company’s ownership. Buying a share means you own part of a company whose share you bought.
However, unlike the fresh produce markets, in POMSoX, the buying and selling of shares is done by middleman called stockbrokers.
Stockbrokers are the middleman that do the buying and selling on behalf of their clients and are also independent financial advisors who advise their clients on all forms of investment advice including shares investing.
According to Law, not just anybody can become stockbroker. And according to Law, you can only buy and sell shares in POMSoX through a stockbroker.
There are two stockbrokers in Papua New Guinea.
QUICK WRAP UP: What is a stock broker and what are his roles? A stockbroker is a middleman who buys and sells shares on behalf of investors.
Because they buy and sell shares onbehalf of you, they charge their service fee called the brokerage fee. Brokers like BSP Capital or Kina Securities offer free consultation. Once you decide to buy or sell shares, and when you actually execute it via your broker, then you will be required to buy the brokerage fee that varies from each broker.
Word of Caution
Stockbrokers are financial advisors. They make money from you buying and selling shares. So it is logical for a broker to urge you to go ahead and buy or sell shares. See the logic? If you don’t buy or sell, they don’t make commission. This is not to say, that stock brokers cheat. No. No. No. Infect we have a beautiful female stockbroker from Kina securities that helps us a lot.
Our advice is before you approach a stock broker, you should learn about the thing call STOCK TRADING and learn it well. That is so that you can act on your own thoughts and the stockbroker be your guide. We have long hours of discussions with our stock broker because we do our own analysis on which stocks to buy and at what price to buy and such and our broker only guides as with her views.